[Federal Register Volume 87, Number 133 (Wednesday, July 13, 2022)]
[Proposed Rules]
[Pages 42012-42048]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2022-14214]



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Vol. 87

Wednesday,

No. 133

July 13, 2022

Part III





Federal Trade Commission





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16 CFR Part 463





Motor Vehicle Dealers Trade Regulation Rule; Proposed Rule

  Federal Register / Vol. 87 , No. 133 / Wednesday, July 13, 2022 / 
Proposed Rules  

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FEDERAL TRADE COMMISSION

16 CFR Part 463

RIN 3084-AB72


Motor Vehicle Dealers Trade Regulation Rule

AGENCY: Federal Trade Commission.

ACTION: Notice of proposed rulemaking.

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SUMMARY: The Federal Trade Commission (``FTC'' or ``Commission'') seeks 
comment on this notice of proposed rulemaking (``NPRM'') related to the 
sale, financing, and leasing of motor vehicles by motor vehicle 
dealers. The proposed rule would prohibit motor vehicle dealers from 
making certain misrepresentations in the course of selling, leasing, or 
arranging financing for motor vehicles, require accurate pricing 
disclosures in dealers' advertising and sales discussions, require 
dealers to obtain consumers' express, informed consent for charges, 
prohibit the sale of any add-on product or service that confers no 
benefit to the consumer, and require dealers to keep records of 
advertisements and customer transactions. This NPRM invites written 
comments on all issues raised herein and seeks answers to the specific 
questions set forth in Section VIII of this document.

DATES: Comments must be received on or before September 12, 2022.

ADDRESSES: Interested parties may file a comment online or on paper by 
following the instructions in the Request for Comment part of the 
SUPPLEMENTARY INFORMATION section below. Write ``Motor Vehicle Dealers 
Trade Regulation Rule--Rulemaking, No. P204800'' on your comment, and 
file it online at https://www.regulations.gov, by following the 
instructions on the web-based form. If you prefer to file your comment 
on paper, mail your comment to the following address: Federal Trade 
Commission, Office of the Secretary, 600 Pennsylvania Avenue NW, Suite 
CC-5610 (Annex C), Washington, DC 20580.

FOR FURTHER INFORMATION CONTACT: Daniel Dwyer or Sanya Shahrasbi, 
Division of Financial Practices, Bureau of Consumer Protection, Federal 
Trade Commission, 202-326-2957 (Dwyer), 202-326-2709 (Shahrasbi), 
[email protected], [email protected].

SUPPLEMENTARY INFORMATION:

I. Background

    Buying or leasing a motor vehicle is, for many consumers, both 
essential and expensive.\1\ Millions of Americans depend on vehicles 
for daily living, with recent data showing that over 95% of American 
households own at least one motor vehicle,\2\ and nearly 84% of 
Americans drive to work as of 2020.\3\ Americans rely on their vehicles 
for work, school, childcare, groceries, medical visits, and many other 
important tasks in their daily lives. This necessity does not come 
cheap: a new vehicle is the second-most expensive purchase many 
consumers make, falling only behind purchasing a home.\4\ For purchases 
at new car dealerships, the average new vehicle now sells for more than 
$42,000,\5\ and the average used vehicle sells for more than 
$26,000.\6\ All told, Americans spent more than $2.8 trillion dollars 
on motor vehicles and vehicle parts in 2021.\7\
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    \1\ In this proposed rulemaking, ``auto,'' ``automobile,'' 
``car,'' ``motor vehicle,'' and ``vehicle'' refer to motor vehicles 
as defined in Section 1029 of the Dodd-Frank Wall Street Reform and 
Consumer Protection Act (``Dodd-Frank Act''), 15 U.S.C. 5519(f)(1).
    \2\ U.S. Census Bureau, American Community Survey: Means of 
Transportation to Work by Selected Characteristics, 2020, https://data.census.gov/cedsci/table?q=S0802&tid=ACSST5Y2020.S0802 (last 
visited Apr. 25, 2022) (listing 4.2% of population as having ``[n]o 
vehicle available'' in 2020); compare U.S. Census Bureau, American 
Community Survey: Selected Housing Characteristics, 2020, https://data.census.gov/cedsci/table?q=vehicle&tid= ACSDP5Y2020.DP04 (last 
visited Apr. 25, 2022) (listing 8.5% of households as having ``no 
vehicles available'').
    \3\ U.S. Census Bureau, American Community Survey: Means of 
Transportation to Work by Selected Characteristics, 2020, https://data.census.gov/cedsci/table?q=S0802&tid=ACSST5Y2020.S0802 (last 
visited Apr. 25, 2022) (including those who commute in a car, truck, 
or van, either alone or by carpool).
    \4\ Fed. Trade Comm'n, Buying a New Car, https://www.consumer.ftc.gov/articles/0209-buying-new-car (last visited Apr. 
25, 2022); see also Am. Auto. Ass'n., Average Annual Cost of New 
Vehicle Ownership, https://www.aaa.com/autorepair/articles/average-annual-cost-of-new-vehicle-ownership (last visited Apr. 25, 2022) 
(``After a home purchase, buying a vehicle is usually a consumer's 
second biggest expense.''); Bureau of Lab. Stats., Consumer 
Expenditures: Multiyear Tables (2013-2020) at 2, https://www.bls.gov/cex/tables/calendar-year/mean/cu-all-multi-year-2013-2020.pdf (noting average annual home ownership expenditures of 
$7,473 and average annual vehicle purchase expenditures of $4,523 
per consumer in 2020).
    \5\ Nat'l Auto. Dealers Ass'n, NADA Data 2021 at 7, https://www.nada.org/media/4695/download?inline (noting average retail 
selling price of $42,379 for new vehicles sold by dealerships in 
2021).
    \6\ Id. at 10 (noting average retail selling price of $26,709 
for used vehicles sold by new vehicle dealerships in 2021).
    \7\ Bureau of Econ. Analysis, National Data: National Income and 
Product Accounts, Personal Consumption Expenditures by Major Type of 
Product at Table 2.3.5, https://apps.bea.gov/iTable/iTable.cfm?reqid=19&step=2#reqid=19&step=2&isuri=1&1921=survey (last 
visited Apr. 25, 2022).
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    Given how expensive it can be to buy a vehicle, many consumers rely 
on financing to complete their purchases. Indeed, according to public 
reports, 81% of new motor vehicle purchases, and nearly 35% of used 
vehicle purchases, are financed.\8\ The motor vehicle financing market 
is the third-largest consumer credit market in the United States, after 
mortgages and student loans. By the end of 2021, Americans had more 
than 111 million outstanding auto loans, and owed more than $1.46 
trillion thereon.\9\ Motor vehicle financing is the third-largest 
source of debt for U.S. consumers under the age of 50, and the second-
largest source of debt for those 50 and older.\10\
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    \8\ Melinda Zabritski, Experian Info. Sol's, Inc., State of the 
Automotive Finance Market Q4 2020 at 5, https://www.experian.com/content/dam/marketing/na/automotive/quarterly-webinars/credit-trends/2020-quarterly-trends/v2-2020-q4-state-automotive-market.pdf.
    \9\ Fed. Rsrv. Bank of N.Y., Quarterly Report on Household Debt 
and Credit, 2021: Q4 at 3-4 (Feb. 2022), https://www.newyorkfed.org/medialibrary/interactives/householdcredit/data/pdf/HHDC_2021Q4.pdf; 
Fed. Rsrv. Bank of N.Y., Data underlying report at ``Page 3 Data'' 
and ``Page 4 Data'' tabs, https://www.newyorkfed.org/medialibrary/interactives/householdcredit/data/xls/hhd_c_report_2021q4.xlsx (last 
visited Apr. 25, 2022) (number of open auto loan accounts and total 
balance outstanding).
    \10\ Fed. Rsrv. Bank of N.Y., Data underlying report at ``Page 
21 Data'' tab, https://www.newyorkfed.org/medialibrary/interactives/householdcredit/data/xls/hhd_c_report_2021q4.xlsx (last visited Apr. 
25, 2022).
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    Buying or leasing a vehicle is not only an expensive endeavor, but 
the transaction itself is time-consuming and arduous. Consumers who 
purchase vehicles at a dealership may spend five hours or more--or even 
days--doing so.\11\ And that does not include the time spent visiting 
dealerships when consumers do not make purchases, or the hours it can 
take to travel to the dealerships themselves.\12\ Consumers

[[Page 42013]]

may need to take time off work and arrange daycare or take young 
children to the dealership, and the process can be especially taxing 
for one-vehicle families who also need their vehicle for commuting and 
day-to-day tasks like buying groceries and attending medical 
appointments.
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    \11\ Mary W. Sullivan, Matthew T. Jones & Carole L. Reynolds, 
Fed. Trade Comm'n, The Auto Buyer Study: Lessons from In-Depth 
Consumer Interviews and Related Research 15 (2020) [hereinafter Auto 
Buyer Study], https://www.ftc.gov/system/files/documents/reports/auto-buyer-study-lessons-depth-consumer-interviews-related-research/bcpreportsautobuyerstudy.pdf (noting the purchase transactions in 
the FTC's qualitative study often took 5 hours or more to complete, 
with some extending over several days); Cf. Cox Automotive, 2020 Cox 
Automotive Car Buyer Journey 6 (2020), available at https://
b2b.autotrader.com/app/uploads/2020-Car-Buyer-Journey-Study.pdf 
(reporting average consumer time spent shopping for a vehicle at 14 
hours, 53 minutes, including 4 hours, 49 minutes visiting 
dealerships/sellers).
    \12\ For example, consumers have complained when they go to a 
dealership based on an offer that the dealer refuses to honor once 
they have spent hours driving there and have then spent additional 
time on the lot. See, e.g., Complaint, FTC & Illinois v. N. Am. 
Auto. Servs., Inc., No. 1:22-cv-0169 at ]] 23-26 (N.D. Ill. Mar. 31, 
2022) (alleging many consumers drive hours to dealerships based on 
the advertised prices; test-driving and selecting a vehicle, and 
negotiating the price and financing terms, is an often hours-long 
process; and, after this time, dealers falsely told consumers add-on 
products or packages were required to purchase or finance the 
vehicle, even though they were not included in the low prices 
advertised or disclosed to consumers who called to confirm prices).
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    The Commission, the nation's consumer protection agency, is charged 
with enforcing key laws and regulations applicable to the motor vehicle 
marketplace, including sales, financing, and leasing.\13\ The FTC 
protects consumers in motor vehicle transactions through law 
enforcement actions, rulemaking, consumer education, and business 
guidance, aided by information-gathering efforts such as agency 
roundtables and industry research. In the past ten years, the FTC has 
brought more than 50 motor vehicle-related enforcement actions, 
including matters involving misleading motor vehicle advertising, 
financing paperwork falsification, ``yo-yo'' financing, deceptive and 
unfair add-on fees, discrimination, and privacy and data security 
issues.\14\ At the same time, the FTC has conducted a qualitative study 
of consumer experiences \15\ and hosted public events to engage in a 
dialogue with consumer and dealer groups and other stakeholders, gather 
information, spotlight misleading practices, and raise awareness of 
issues that can affect consumers in this space, including consumers who 
are servicemembers.\16\ The FTC also has posted many educational 
materials to assist consumers and dealers on motor vehicle market 
issues, and we have worked collaboratively with industry groups to do 
the same.\17\
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    \13\ These laws include the FTC Act, 15 U.S.C. 41-58; the Truth 
in Lending Act, 15 U.S.C. 1601-1667f, and its implementing 
Regulation Z, 12 CFR parts 226 and 1026; the Consumer Leasing Act, 
15 U.S.C. 1667-1667f and its implementing Regulation M, 12 CFR parts 
213 and 1013; and the Used Car Rule, 16 CFR part 445.
    \14\ See generally Fed. Trade Comm'n, The Auto Marketplace, 
https://www.ftc.gov/news-events/media-resources/consumer-finance/auto-marketplace.
    \15\ See, e.g., Carole L. Reynolds & Stephanie E. Cox, Fed. 
Trade Comm'n, Buckle Up: Navigating Auto Sales and Financing (2020), 
https://www.ftc.gov/reports/buckle-navigating-auto-sales-financing 
[hereinafter Buckle Up]; Auto Buyer Study, supra note 11.
    \16\ For example, the FTC has held public workshops: (1) in 
conjunction with the National Highway Traffic Safety Administration, 
to examine the consumer privacy and security issues posed by 
automated and connected motor vehicles, see Connected Cars: Privacy, 
Security Issues Related to Connected, Automated Vehicles (June 28, 
2017), https://www.ftc.gov/news-events/events-calendar/2017/06/connected-cars-privacy-security-issues-related-connected; (2) to 
explore competition and related issues in the U.S. motor vehicle 
distribution system including how consumers and businesses may be 
affected by state regulations and emerging trends in the industry, 
Auto Distribution: Current Issues & Future Trends (Jan. 19, 2016), 
https://www.ftc.gov/news-events/events-calendar/2016/01/auto-distribution-current-issues-future-trends; (3) on military consumer 
financial issues including automobile purchases, financing, and 
leasing, Military Consumer Financial Workshop (July 2017), https://www.ftc.gov/news-events/events-calendar/military-consumer-workshop; 
and (4) through a series of three roundtables on numerous issues in 
selling, financing, and leasing automobiles, The Road Ahead: Selling 
Financing, and Leasing Motor Vehicles (Feb. 2011, Aug. 2011, and 
Nov. 2011), https://www.ftc.gov/news-events/events-calendar/2011/11/road-ahead-selling-financing-leasing-motor-vehicles, https://www.ftc.gov/news-events/events-calendar/2011/08/road-ahead-selling-financing-leasing-motor-vehicles, https://www.ftc.gov/news-events/events-calendar/2011/04/road-ahead-selling-financing-leasing-motor-vehicles; see also Consumers for Auto Reliability and Safety, 
Comment Letter on Motor Vehicle Roundtables, Project No. P104811 at 
6 (Apr. 1, 2012), https://www.ftc.gov/sites/default/files/documents/public_comments/public-roundtables-protecting-consumers-sale-and-leasing-motor-vehicles-project-no.p104811-00108/00108-82875.pdf 
(stating that Director of the Navy-Marine Corps Relief Society in 
San Diego indicated before the California Assembly Committee on 
Banking and Finance ``the number one issue they are confronted with 
is used car dealers who are taking advantage of military 
personnel.''). These events, and others, have included speakers 
representing consumers, dealers, regulators, and other industry 
stakeholders.
    \17\ See, e.g., Fed. Trade Comm'n, The Auto Marketplace, https://www.ftc.gov/news-events/media-resources/consumer-finance/auto-marketplace; see also Nat'l Auto. Dealers Ass'n, Understanding 
Vehicle Financing,https://www.nada.org/WorkArea/DownloadAsset.aspx?id=21474839119 (prepared cooperatively by Am. 
Fin. Servs. Ass'n Educ. Found., Fed. Trade Comm'n & Nat'l Auto. 
Dealers Ass'n). Industry groups also play an important role in 
educating their members on how to comply with the law, including by 
issuing guidance in specific areas. See, e.g., Nat'l Auto. Dealers 
Ass'n, Am. Int'l Auto. Dealers Ass'n & Nat'l Ass'n of Minority Auto. 
Dealers, Voluntary Protection Products: A Model Dealership Policy 
(2019), https://www.nada.org/regulatory-compliance/voluntary-protection-products-model-dealership-policy.
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    The Dodd-Frank Wall Street Reform and Consumer Protection Act 
(``Dodd-Frank Act'') was signed into law in 2010.\18\ Section 1029 of 
the Dodd-Frank Act authorizes the FTC to prescribe rules with respect 
to unfair or deceptive acts or practices by motor vehicle dealers,\19\ 
and to do so pursuant to the Commission's authority under the FTC Act 
and in accordance with the Administrative Procedure Act (``APA'').\20\ 
Although it has engaged in law enforcement, the Commission's relatively 
small size and limited resources make it challenging to investigate and 
act upon the tens of thousands of complaints regarding dealerships. As 
discussed below, many of the problems observed in the motor vehicle 
marketplace persist in the face of repeated federal and state 
enforcement actions, suggesting the need for additional measures to 
deter deceptive and unfair practices. In addition, a rule prohibiting 
unfair or deceptive acts or practices in the motor vehicle marketplace 
would allow the FTC to seek redress for harmed consumers and obtain 
other forms of monetary relief in cases involving FTC Act 
violations.\21\ Further, law-abiding dealers suffer when other dealers 
gain business through deceptive or unfair means. For all these reasons, 
the Commission believes it is appropriate to utilize its rulemaking 
authority to issue a rule to address unfair or deceptive acts or 
practices in the motor vehicle marketplace.
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    \18\ Public Law 111-203 (2010).
    \19\ See supra note 1.
    \20\ 12 U.S.C. 5519.
    \21\ Under Section 19(a)(1) of the FTC Act, the Commission may 
sue in federal district court ``any person, partnership, or 
corporation'' that ``violates any rule under [the FTC Act] 
respecting unfair or deceptive acts or practices.'' 15 U.S.C. 
57b(a)(1). Where such liability is found, under Section 19(b) a 
court may ``grant such relief as [it] finds necessary to redress 
injury . . . resulting from the rule violation,'' including the 
``rescission or reformation of contracts, the refund of money or 
return of property, [or] the payment of damages.'' Id. 57b(b).
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I. Overview of Vehicle Dealers and Motor Vehicle Financing

A. New and Used Motor Vehicle Dealerships

    There are more than 21,000 new motor vehicle dealerships across the 
country.\22\ Collectively, these dealerships sold more than 17 million 
new vehicles per year in each of the past three years,\23\ averaging 
more than 800 new vehicle sales per dealership per year.\24\ New- 
vehicle dealers spend an average of more than $600 on advertising per 
vehicle sold \25\--more

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than half of which goes toward online advertising.\26\ According to 
industry sources, these dealers averaged a gross profit of about $2,444 
per vehicle.\27\ More than half of this profit came from the dealers' 
financing and insurance, or ``F&I'', offices, which sell consumers 
financing and leasing, as well as add-on products and services such as 
vehicle service contracts.\28\
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    \22\ U.S. Census Bureau, All Sectors: County Business Patterns, 
including ZIP Code Business Patterns, by Legal Form of Organization 
and Employment Size Class for the U.S., States, and Selected 
Geographies: 2019, https://data.census.gov/cedsci/
table?q=CBP2019.CB1900CBP&n=44111%3A44112&tid=CBP2019.CB1900CBP&hideP
review=true&nkd=EMPSZES~001,LFO~001 (listing 21,427 establishments 
for ``new car dealers,'' NAICS code 44111).
    \23\ Edmunds, Automotive Industry Trends [verbar] 2020 at 2, 
https://static.ed.edmunds-media.com/unversioned/img/industry-center/insights/2020-automotive-trends.pdf.
    \24\ Nat'l Auto. Dealers Ass'n, NADA Data 2021 at 7, https://www.nada.org/media/4695/download?inline. New vehicle dealerships are 
also a significant source of used vehicles, having sold between 13.7 
million and 14.9 million such vehicles per year over the past three 
years. Id. at 10 (graph of used-vehicle sales by new-vehicle 
dealerships, by year).
    \25\ Id. at 15 (listing average dealership advertising per new 
vehicle sold of $602).
    \26\ Id. at 16 (listing 63.6% of estimated advertising 
expenditures by medium as internet expenditures).
    \27\ Nat'l Auto. Dealers Ass'n, Average Dealership Profile 1 
(2020), https://www.nada.org/media/4136/download?attachment.
    \28\ Id. (listing an average 6.3% gross as a percentage of the 
vehicle's selling price, and a 3.2% average F&I gross as a 
percentage of new-vehicle dept. sales). While many dealers have seen 
increased profits during the pandemic, to the extent some dealers 
may be profiting through unscrupulous practices, the proposed rule 
would help honest dealers compete on a level playing field. See Nora 
Eckert & Mike Colias, Ford and GM Warn Dealers to Stop Charging So 
Much for New Cars, Wall St. J. (Feb. 9, 2022), https://www.wsj.com/articles/ford-gm-warn-dealers-charge-above-sticker-price-and-face-repercussions-11644323580 (discussing how many dealers have 
increased markups, including by requiring consumers to accept added 
fees and warranty protection as part of the asking price). 
Conditioning a vehicle sale or lease on the purchase of an add-on 
product or service is contrary to industry guidance. See Nat'l Auto. 
Dealers Ass'n et al., Voluntary Protection Products: A Model 
Dealership Policy 4 (2019), https://www.nada.org/regulatory-compliance/voluntary-protection-products-model-dealership-policy 
(stating dealerships should ``prominently display to customers a 
poster stating that [add-on products and services] offered by the 
dealership are optional and are not required to purchase or lease a 
vehicle or obtain warranty coverage, financing, financing on 
particular terms, or any other product or service offered by the 
dealership.'').
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    There are more than 25,000 used motor vehicle dealerships across 
the country,\29\ and used vehicle sales are nearly evenly split between 
new and used car dealerships.\30\ Used vehicles sold by new-vehicle 
dealerships cost $24,542 on average.\31\ These vehicles brought in an 
average gross profit of about $2,675 per vehicle, more than a third of 
which came from the F&I office.\32\ Independent used vehicle 
dealerships sold an average of 684 vehicles per dealership in 2019, 
with an average gross profit of more than $6,000 per vehicle.\33\ While 
some independent used vehicle dealerships do not have a separate F&I 
office, more than half of them sell add-on products.\34\
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    \29\ U.S. Census Bureau, All Sectors: County Business Patterns, 
including ZIP Code Business Patterns, by Legal Form of Organization 
and Employment Size Class for the U.S., States, and Selected 
Geographies: 2019, https://data.census.gov/cedsci/
table?q=CBP2019.CB1900CBP&n=44111%3A44112&tid=CBP2019.CB1900CBP&hideP
review=true&nkd=EMPSZES~001,LFO~001 (listing 25,098 establishments 
for ``used car dealers,'' NAICS code 44112).
    \30\ In 2020, 52.2% of used motor vehicle sales were by new car 
dealerships, while 47.8% were by independent used vehicle 
dealerships. Melinda Zabritski, Experian Info. Sol's, Inc., State of 
the Automotive Finance Market Q4 2020 at 32, https://www.experian.com/content/dam/marketing/na/automotive/quarterly-webinars/credit-trends/2020-quarterly-trends/v2-2020-q4-state-automotive-market.pdf.
    \31\ Nat'l Auto. Dealers Ass'n, NADA Data 2021: Midyear Report 
10, https://www.nada.org/media/4694/download?inline.
    \32\ Nat'l Auto. Dealers Ass'n, Average Dealership Profile 1 
(2020), https://www.nada.org/media/4136/download?attachment (listing 
an average 6.3% gross as a percentage of the vehicle's selling 
price, and a 3.2% average F&I gross as a percentage of new-vehicle 
dept. sales).
    \33\ Nat'l Indep. Auto. Dealers Ass'n, NIADA Used Car Industry 
Report 2020 at 21 (2020).
    \34\ Id. at 8, 10.
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B. Motor Vehicle Financing and Leasing Overview

    Consumers can finance the purchase or use of a vehicle in several 
ways. Those interested in purchasing a vehicle generally use either 
indirect financing or direct financing. Others--particularly those with 
thin or damaged credit--work with a so-called ``buy here, pay here'' 
dealership for financing, typically without the involvement of an 
outside financing entity.\35\ Finally, some consumers opt to lease a 
vehicle rather than purchase it.\36\
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    \35\ In some regions, ``lease here, pay here'' dealerships may 
provide leases to consumers through similar programs.
    \36\ Melinda Zabritski, Experian Info. Sol's, Inc., State of the 
Automotive Finance Market Q4 2020 at 19, https://www.experian.com/content/dam/marketing/na/automotive/quarterly-webinars/credit-trends/2020-quarterly-trends/v2-2020-q4-state-automotive-market.pdf 
(more than 72% of new vehicle financing in MI is for leases; the 
Northeast ranges from 43% in VT to 66% in NY; other states range 
from 45% (OH) to less than 4% (AR)).
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    Approximately 70 percent of consumers use dealer-provided indirect 
financing at the dealership.\37\ In this scenario, the dealership 
collects financial information on the consumer and forwards that 
information to prospective financing entities. These financing 
entities, who work with the dealer, evaluate that information and in 
the process determine whether, and on what terms, to provide 
credit.\38\ These terms include the ``buy rate,'' a risk-based finance 
charge that reflects the interest rate at which the entity will finance 
the deal.\39\ Dealers often add a finance charge called a ``dealer 
reserve'' or ``markup'' to the buy rate.\40\ Unlike the buy rate, the 
markup is not based on the underwriting risk or credit characteristics 
of the applicant.\41\
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    \37\ See Nat'l Auto. Dealers Ass'n, Dealer-Assisted Financing 
Benefits Consumers, https://www.nada.org/autofinance/ (last visited 
Apr. 25, 2022) (noting 7 out of 10 consumers finance through their 
dealership). This is also known as ``dealer financing,'' because 
consumers obtain financing through the dealer that partners with 
other entities in the financing process.
    \38\ Dealers often may originate the financing and then sell the 
financing agreements to third-parties.
    \39\ Lesley Fair, FTC says Bronx Honda discriminated against 
African-American and Hispanic consumers, Fed. Trade Comm'n Business 
Blog (May 27, 2020), https://www.ftc.gov/business-guidance/blog/2020/05/ftc-says-bronx-honda-discriminated-against-african-american-hispanic-consumers.
    \40\ See, e.g., Nat'l Auto. Dealers Ass'n, Nat'l Ass'n of 
Minority Auto. Dealers & Am. Int'l Auto. Dealers Ass'n, Fair Credit 
Compliance Policy & Program 1, n.4 & accompanying text, https://www.nada.org/media/4558/download?inline.
    \41\ Id. (describing this as the amount dealers earn for 
arranging financing, measured as the difference between the 
consumer's APR and the wholesale ``buy rate'' at which a finance 
source buys the finance contract from the dealer, and noting finance 
sources typically permit dealers to retain the dealer 
participation).
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    Alternatively, those who use direct financing apply for and obtain 
financing directly from a credit union, bank, or other financing 
entity.\42\ These consumers typically receive an interest rate quote 
from the entity prior to arriving at a dealership to purchase a 
vehicle. Then, once these consumers agree to purchase a vehicle, they 
can use the financing from the entity to pay for the vehicle.\43\ 
Dealerships do not profit on the financing portion of the transaction 
when a consumer arranges financing directly.
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    \42\ Consumer Fin. Prot. Bureau, Automobile Finance Examination 
Procedures 4 (Aug. 2019), https://files.consumerfinance.gov/f/documents/201908_cfpb_automobile-finance-examination-procedures.pdf.
    \43\ Consumer Fin. Prot. Bureau, Consumer Voices on Automobile 
Financing 5 (June 2016), https://files.consumerfinance.gov/f/documents/201606_cfpb_consumer-voices-on-automobile-financing.pdf.
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    ``Buy here, pay here'' dealers typically finance their motor 
vehicle sales in-house rather than routinely assigning their financing 
to unaffiliated parties.\44\ That means consumers borrow from and make 
their payments directly to the dealership. Interest rates for this 
financing are usually much higher than for direct or indirect 
financing,\45\ and consumers default on this financing at

[[Page 42015]]

a high rate.\46\ The dealer often performs its own collections and 
repossession operations when consumers fall behind. ``Buy here, pay 
here'' accounts for 6-8% of financing to purchase a vehicle.\47\
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    \44\ See Consumer Fin. Prot. Bureau, Automobile Finance 
Examination Procedures 4 (Aug. 2019), https://files.consumerfinance.gov/f/documents/201908_cfpb_automobile-finance-examination-procedures.pdf. (``While most Buy-Here, Pay-Here 
(BHPH) dealers are independently owned entities that serve as the 
primary lender and servicer, some larger BHPH dealers sell or assign 
their contracts to an affiliated BHPH finance company once the 
contract has been consummated with the consumer.'')
    \45\ As of 2017, interest rates at ``buy here, pay here'' 
dealerships averaged around 20%. Nat'l Indep. Auto Dealers Ass'n, 
NIADA Used Car Industry Report 2019 at 14. In contrast, the average 
financing rate for used vehicles across the industry was 8.43% in 
the fourth quarter of 2020. Melinda Zabritski, Experian Info. Sol's, 
Inc., State of the Automotive Finance Market Q4 2020 at 38, https://www.experian.com/content/dam/marketing/na/automotive/quarterly-webinars/credit-trends/2020-quarterly-trends/v2-2020-q4-state-automotive-market.pdf.
    \46\ For example, approximately 37.5% of ``buy here, pay here'' 
consumers defaulted in 2019. Nat'l Indep. Auto. Dealers Ass'n, NIADA 
Used Car Industry Report 2020 at 13. The overall motor vehicle debt 
default rate was 4.94% in 2019. Zhu Wang, Fed. Rsrv. Bank of 
Richmond, Coronavirus and Auto Lending: A Market Outlook (Apr. 16, 
2020), https://www.richmondfed.org/-/media/RichmondFedOrg/research/economists/bios/pdfs/wang_covid19_paper.pdf.
    \47\ Melinda Zabritski, Experian Info. Sol's, Inc., State of the 
Automotive Finance Market Q2 2020 at 8, https://www.experian.com/content/dam/marketing/na/automotive/quarterly-webinars/credit-trends/2020-q2-safm-final.pdf.
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    Leasing involves arranging to drive a vehicle for a set period of 
time--typically around three years \48\--and for a certain maximum 
number of miles--typically 10-15,000 miles per year--in exchange for an 
upfront payment, a monthly payment, and fees before, during, and at the 
end of the lease, including for excess wear and usage over the mileage 
limit.\49\ When consumers lease a vehicle, they do not own it, and they 
must return the vehicle when the lease expires, though they may have 
the option to purchase the vehicle at the end of the lease period. 
Nearly 27% of new vehicles are leased, as are just over 8% of used 
vehicles.\50\
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    \48\ Melinda Zabritski, Experian Info. Sol's, Inc., State of the 
Automotive Finance Market Q4 2020 at 26, https://www.experian.com/content/dam/marketing/na/automotive/quarterly-webinars/credit-trends/2020-quarterly-trends/v2-2020-q4-state-automotive-market.pdf.
    \49\ See Fed. Trade Comm'n, Financing or Leasing a Car, https://www.consumer.ftc.gov/articles/0056-financing-or-leasing-car (last 
visited Apr. 25, 2022) (``The mileage limit in most standard leases 
is typically 15,000 or fewer per year''); Consumer Fin. Prot. 
Bureau, What should I know about the differences between leasing and 
buying a vehicle?, https://www.consumerfinance.gov/ask-cfpb/what-should-i-know-about-the-differences-between-leasing-and-buying-a-vehicle-en-815/ (last visited Apr. 25, 2022) (``Most leases include 
mileage restrictions of 10,000-15,000 miles per year.'').
    \50\ Melinda Zabritski, Experian Info. Sol's, Inc., State of the 
Automotive Finance Market Q4 2020 at 5, https://www.experian.com/content/dam/marketing/na/automotive/quarterly-webinars/credit-trends/2020-quarterly-trends/v2-2020-q4-state-automotive-market.pdf.
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II. Deception and Unfairness in the Motor Vehicle Marketplace

    For many consumers, buying or leasing a vehicle is a difficult and 
time-consuming experience. The process of shopping for a vehicle, 
conducting test drives, providing financing information, and completing 
stacks of paperwork at a dealership can take many hours or even 
days,\51\ and can involve unfair or deceptive practices. The FTC 
received more than 100,000 complaints in each of the past three years 
regarding new and used motor vehicle sales, financing, service & 
warranties, and rentals & leasing, and complaints about motor vehicle 
transactions are regularly in the top ten complaint categories tracked 
by the agency.\52\
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    \51\ Auto Buyer Study, supra note 11, at 15 (finding the process 
of completing a vehicle purchase often took five hours or more, and 
sometimes several days); Cf. Cox Automotive, 2020 Cox Automotive Car 
Buyer Journey 5-6 (2020), available at https://b2b.autotrader.com/app/uploads/2020-Car-Buyer-Journey-Study.pdf (noting, on average, 
consumers spend 89 day in the market and 14 hours, 53 minutes 
shopping for a vehicle).
    \52\ See, e.g., Fed. Trade Comm'n, Consumer Sentinel Network 
Data Book 2021 at 7-8 & app. B3 at 85 (Feb. 2022), https://www.ftc.gov/system/files/ftc_gov/pdf/CSN%20Annual%20Data%20Book%202021%20Final%20PDF.pdf (listing motor 
vehicle-related complaints as the eighth most common report category 
in 2021, and reporting complaints about new and used motor vehicle 
sales, financing, service & warranties, and rentals & leasing, 
collectively, of more than 100,000 in 2019, 2020, and 2021).
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    The FTC uses its authority under Section 5 to stop deceptive and 
unfair acts or practices in the motor vehicle marketplace. A 
representation, omission, or practice is deceptive if it is likely to 
mislead consumers acting reasonably under the circumstances and is 
material to consumers--that is, it would likely affect the consumer's 
conduct or decisions with regard to a product or service.\53\ Some 
deception cases involve omission of material information, the 
disclosure of which is necessary to prevent the claim, practice, or 
sale from being misleading.\54\ Deceptive information distorts the 
marketplace and thus, these false and misleading statements are 
unlawful regardless of an intent to deceive.\55\
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    \53\ See Fed. Trade Comm'n, FTC Policy Statement on Deception 2, 
5, 103 F.T.C. 174 (1984) (appended to Cliffdale Assocs., Inc., 103 
F.T.C. 110, 183 (1984)), https://www.ftc.gov/system/files/documents/public_statements/410531/831014deceptionstmt.pdf.
    \54\ Id.
    \55\ In re Sears, Roebuck & Co., 95 F.T.C. 406, 517 n.9 (1980) 
(citing Regina Corp. v. FTC, 322 F.2d 765, 768 (3d Cir. 1963).
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    A practice is considered unfair under Section 5 if: (1) it causes, 
or is likely to cause, substantial injury; (2) the injury is not 
reasonably avoidable by consumers; and, (3) the injury is not 
outweighed by benefits to consumers or competition.\56\
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    \56\ 15 U.S.C. 45(n).
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    Chronic problems confronting consumers in the sales, financing, and 
leasing process include advertising misrepresentations and unlawful 
practices related to add-ons and deceptive pricing.\57\
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    \57\ While other issues exist in the motor vehicle sales, 
financing, and leasing space, including issues involving 
discrimination, financing application falsification, data privacy 
and security, and yo-yo financing, this proposal's core focus is on 
misrepresentations and add-on and pricing practices.
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A. Advertising Misrepresentations

    Advertisements for motor vehicles are often consumers' first 
contact in the vehicle-buying or leasing process. Dealers utilize a 
variety of means to reach consumers, including television and radio 
commercials, social media and online advertisements, and direct mail 
marketing.
    The FTC has brought many cases concerning misrepresentations 
regarding key pricing aspects of a vehicle purchase, including the 
price of the vehicle, the availability of discounts and rebates, the 
monthly payment amount for a financed purchase or lease, or the amount 
due at signing.\58\ Other misrepresentations regarding financial terms 
that have been the subject of FTC complaints have included whether an 
offer pertains to a purchase or a lease \59\ and whether the dealer or 
consumer is responsible for paying off ``negative equity,'' i.e., the 
outstanding debt on a vehicle that is being traded in as part of 
another vehicle purchase.\60\ And according to other FTC actions, some 
dealers have lured potential buyers through financial incentives 
incidental

[[Page 42016]]

to the purchase, such the promise of a valuable prize.\61\
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    \58\ See Complaint, In re Timonium Chrysler, Inc., No. C-4429 
(F.T.C. Jan. 28, 2014) (alleging dealership advertised internet 
prices and dealer discounts but failed to disclose consumer would 
have to qualify for multiple rebates not generally available to 
them); Complaint, In re Ganley Ford West, Inc., No. C-4428 (F.T.C. 
Jan. 28, 2014) (alleging dealership advertised discounts on vehicle 
prices, but failed to disclose discounts were only available on the 
most expensive models); Complaint, In re Progressive Chevrolet Co., 
No. C-4578 (F.T.C. June 13, 2016) (alleging deceptive failure to 
disclose material conditions of obtaining the lease monthly payment 
in their online and print advertising).
    \59\ See Complaint, FTC v. Tate's Auto Ctr. of Winslow, Inc., 
No. 3:18-cv-08176-DJH at ]] 38-46 (D. Ariz. July 31, 2018) (alleging 
company issued advertisements for attractive terms but concealed 
that the terms were only applicable to lease offers); Complaint, 
United States v. New World Auto Imports, Inc. No. 3:16-cv-02401-K at 
]] 36-38 (N.D. Tex. Aug. 18, 2016) (alleging misrepresentation that 
terms were for financing instead of leasing); Complaint, FTC v. 
Universal City Nissan, Inc., No. 2:16-cv-07239 at ]] 85-87 (C.D. 
Cal. Sept. 29, 2016) (alleging dealerships claimed consumers could 
finance the purchase of vehicles with attractive terms and buried 
disclosures indicating such terms were applicable to leases only).
    \60\ Universal City Nissan, No. 2:16-cv-07239 at ]] 82-84 (C.D. 
Cal. Sept. 29, 2016) (alleging misrepresentation that dealer would 
pay off consumer's trade-in when in fact consumers were still 
responsible for outstanding debt on trade-in vehicles); Complaint, 
In re TXVT Ltd. P'ship, No. C-4508 at ]] 17-19 (F.T.C. Feb. 12, 
2015) (alleging failure to disclose in leasing advertising that the 
dealership would pay off the negative equity of consumers' trade in 
vehicle, when in fact, it was merely rolled into the financed amount 
for the consumer's newly financed vehicle).
    \61\ See, e.g., Complaint, FTC v. Traffic Jam Events, LLC, No. 
9395 at ]] 12, 17-19 (F.T.C. Aug. 7, 2020); Complaint, In re 
Fowlerville Ford, Inc., No. C-4433 at ]] 4, 7-9 (F.T.C. Feb. 20, 
2014).
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    Misleading advertisements can cause significant consumer harm, and 
reduce competition amongst law-abiding dealers. When dealerships 
advertise prices, discounts, or other terms that are not actually 
available to typical consumers, those consumers end up selecting that 
dealership instead of others and spending time visiting it and 
transacting with it under false pretenses.

B. Unlawful Practices Relating to Add-Ons and Deceptive Pricing

    Another key consumer protection concern is the sale of ``add-on'' 
products and services in a deceptive or unfair manner. Commonly offered 
add-ons include extended warranties, service and maintenance plans, 
payment programs, guaranteed automobile or asset protection (``GAP'' or 
``GAP insurance''), emergency road service, VIN etching and other theft 
protection devices, and undercoating. Individual add-ons can cost 
consumers thousands of dollars and can significantly increase the 
overall cost to the consumer in the transaction.
    A significant consumer protection concern is consumers paying for 
add-ons without knowing about or expressly agreeing to them.\62\ The 
protracted and paperwork-heavy vehicle-buying process can make it 
difficult for consumers to spot add-on charges, particularly when 
advertised prices do not mention add-ons.\63\ If consumers are 
financing the vehicle, they then undergo a separate financing process, 
which can include wading through a thick stack of dense paperwork 
filled with fine print.\64\ For example, according to an FTC complaint, 
consumers were required to complete a stack of paperwork that ran more 
than sixty pages and required more than a dozen signatures.\65\ This 
paperwork can include hidden charges for add-on products and services, 
causing consumers to purchase those add-ons without knowing about or 
agreeing to them, or without knowing or agreeing to their costs, or 
other key terms.\66\ Unscrupulous dealers are able to slip these 
additional costs past consumers unnoticed and into purchase contracts 
through a variety of means, including by not mentioning them at 
all,\67\ or by focusing consumers' attention on other aspects of the 
complex transaction, such as monthly payments, which might increase 
only marginally with the addition of prorated add-on costs or even be 
made to decrease if the financing term is stretched out, while in fact 
these added costs can be considerable in aggregate.\68\ Dealers

[[Page 42017]]

engaging in this type of conduct have targeted immigrants, communities 
of color, and servicemembers.\69\
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    \62\ See Nat'l Consumer Law Ctr., Auto Add-ons Add Up: How 
Dealer Discretion Drives Excessive, Inconsistent, and Discriminatory 
Pricing (Oct. 11, 2017), https://www.nclc.org/images/pdf/car_sales/report-auto-add-on.pdf; Consumers for Auto Reliability and Safety, 
Comment Letter on Motor Vehicle Roundtables, Project No. P104811 at 
2-3 (Apr. 1, 2012), https://www.ftc.gov/sites/default/files/documents/public_comments/public-roundtables-protecting-consumers-sale-and-leasing-motor-vehicles-project-no.p104811-00108/00108-82875.pdf (citing a U.S. Department of Defense data call summary 
that found the vast majority of military counselors have clients 
with auto financing problems and cited loan packing and yo-yo 
financing as the most frequent auto lending abuses affecting 
servicemembers); Adam J. Levitin, The Fast and the Usurious: Putting 
the Brakes on Auto Lending Abuses, 108 Geo. L.J. 1257, 1265-66 
(2020), https://www.law.georgetown.edu/georgetown-law-journal/wp-content/uploads/sites/26/2020/05/Levitin_The-Fast-and-the-Usurious-Putting-the-Brakes-on-Auto-Lending-Abuses.pdf (discussing ``loan 
packing'' as the sale of add-on products falsely represented as 
being required in order to obtain financing.); Complaint, FTC v. 
Liberty Chevrolet, Inc., No. 1:20-cv-03945 at ]] 12-19 (S.D.N.Y. May 
21, 2020) (alleging deceptive and unauthorized add-on charges in 
consumers' transactions); Universal City Nissan, No. 2:16-cv-07329 
at ]] 59-64 (C.D. Cal. Sept. 29, 2016) (alleging deceptive and 
unauthorized add-on charges in consumers' transactions); Complaint, 
In re TT of Longwood, Inc., No. C-4531 at ]] 6, 9 (F.T.C. July 2, 
2015) (alleging misrepresentations regarding prices for added 
features); see also Auto Buyer Study, supra note 11, at 14 
(``Several participants who thought that they had not purchased add-
ons, or that the add-ons were included at no additional charge, were 
surprised to learn, when going through the paperwork, that they had 
in fact paid extra for add-ons. This is consistent with consumers' 
experiencing fatigue during the buying process or confusion with a 
financially complex transaction, but would also be consistent with 
dealer misrepresentations.'').
    \63\ Liberty Chevrolet No. 1:20-cv-03945 (S.D.N.Y. May 21, 
2020); Universal City Nissan, No. 2:16-cv-07329 (C.D. Cal. Sept. 29, 
2016).
    \64\ See, e.g., Buckle Up, supra note 15, at 10-11 (noting the 
long, complex transaction process); N. Am. Auto. Servs., No. 1:22-
cv-0169 at ]] 23-28 (N.D. Ill. Mar. 31, 2022) (same).
    \65\ N. Am. Auto. Servs., No. 1:22-cv-0169 at ] 24 (N.D. Ill. 
Mar. 31, 2022); see also Buckle Up, supra note 15, at 10-11.
    \66\ Liberty Chevrolet, No. 1:20-cv-03945 at ]] 17-19 (S.D.N.Y. 
May 21, 2020); The Road Ahead: Selling, Financing & Leasing Motor 
Vehicles, https://www.ftc.gov/news-events/events-calendar/2011/08/road-ahead-selling-financing-leasing-motor-vehicles; Dale Irwin, 
Slough Connealy Irwin & Madden LLC, Comment Letter on Public 
Roundtables: Protecting Consumers in the Sale and Leasing of Motor 
Vehicles, Project No. P104811, Submission No. 558507-00060 (Dec. 29, 
2011), available at https://www.regulations.gov/docket/FTC-2022-0036 
(consumer protection lawyer noting ``payment packing'' among 
problems ``that cry out for scrutiny and regulation); Michael 
Archer, Comment Letter on Public Roundtables: Protecting Consumers 
in the Sale and Leasing of Motor Vehicles, Project No. P104811, 
Submission No. 558507-00041 (Aug. 6, 2011), available at https://www.regulations.gov/docket/FTC-2022-0036 (workshop panelist stating 
``I have seen cases wherein the dealer uses financing to pack in 
extra costs or to wipe out trade-in value.''); Comment Letter on 
Public Roundtables: Protecting Consumers in the Sale and Leasing of 
Motor Vehicles, Project No. P104811, Submission No. 558507-00027 
(July 27, 2011), available at https://www.regulations.gov/docket/FTC-2022-0036 (``Confusing or misleading sales terms Extra fees was 
added at the time of purchase and to this day I still do not 
understand what the fee was for, it made the payment higher.''); 
Carrie Ferraro, Legal Servs. of N.J, Comment Letter on Public 
Roundtables: Protecting Consumers in the Sale and Leasing of Motor 
Vehicles, Project No. P104811, Submission No. 558507-00061 (Dec. 29, 
2011), available at https://www.regulations.gov/docket/FTC-2022-0036 
(citing dealers ``engage[d] in packing'' as a common consumer 
complaint received by LSNJ's legal advice hotline); Rosemary Shahan, 
Consumers for Auto Reliability and Safety, Comment Letter on Public 
Roundtables: Protecting Consumers in the Sale and Leasing of Motor 
Vehicles, Project No. P104811, Submission No. 558507-00069 (Jan. 31, 
2012), available at https://www.regulations.gov/docket/FTC-2022-0036 
(noting ``[m]any common auto scams do not generate complaints in 
proportion to how pervasive or costly the practices are, simply 
because the consumers generally remain unaware they have been 
scammed,'' including as a result of ``Loan packing''); Mary W. 
Sullivan, Matthew T. Jones & Carole L. Reynolds, Fed. Trade Comm'n, 
The Auto Buyer Study: Lessons from In-Depth Consumer Interviews and 
Related Research, Supplemental Appendix: Redacted Interview 
Transcripts (2020) [hereinafter Auto Buyer Study: Appendix], https://www.ftc.gov/system/files/documents/reports/buckle-navigating-auto-sales-financing/bcpstaffreportautobuyerstudysuppappendix.pdf (Study 
participant 169810 at 525 (consumer had ``additional items'' charges 
on contract that consumer could not identify); Study participant 
188329 at 730, 740-42 (dealer did not tell consumer about GAP 
insurance or service contract but consumer was charged $599 and 
$1950 for those add-ons, respectively)); Press Release, N.Y. State 
Att'y Gen., A.G. Schneiderman Announces Nearly $14 Million 
Settlement With NYC And Westchester Auto Dealerships For Deceptive 
Practices That Resulted In Inflated Car Prices (June 17, 2015), 
https://ag.ny.gov/press-release/2015/ag-schneiderman-announces-nearly-14-million-settlement-nyc-and-westchester-auto (``This 
settlement is part of the [New York] Attorney General's wider 
initiative to end the practice of ``jamming,'' or unlawfully 
charging consumers for hidden purchases by car dealerships.'').
    \67\ Under the Truth in Lending Act (``TILA'') and its 
implementing Regulation Z, required add-on products and services 
must be factored into the APR and the finance charge disclosed 
during the transaction. See Sections 106, 107, and 128 of the TILA 
(15 U.S.C. 1605, 1606 and 1638) and Sec. Sec.  226.4, 226.18(b), 
(d), and (e), and 226.22 of Regulation Z (12 CFR 226.4, 226.18(b), 
(d) and (e), and 226.22). It is legally impermissible for dealers to 
include charges for such products into a consumer's contract without 
disclosing them under TILA. See, e.g., Complaint, FTC v. Stewart 
Fin. Co. Holdings, Inc., No. 103CV-2648 at ]] 57-60 (N.D. Ga. Sept. 
4, 2003) (alleging violations for failure to include the cost of 
required add-on products in the finance charge and annual percentage 
rate disclosed to consumers).
    \68\ See, e.g., Buckle Up, supra note 15, at 6; Military 
Consumer Financial Workshop (July 19, 2017), https://www.ftc.gov/news-events/events-calendar/military-consumer-workshop; The Road 
Ahead: Selling, Financing & Leasing Motor Vehicles, Fed. Trade 
Comm'n (Aug. 2011) (Public Roundtables) (Session 2 transcript at 40-
41) (noting optional products and services are often already 
included in the monthly payment prices advertised or quoted); 
Christopher Kukla, Ctr. for Responsible Lending, Comment Letter on 
Public Roundtables: Protecting Consumers in the Sale and Leasing of 
Motor Vehicles, Project No. P104811, Submission No. 558507-00071 
(Feb. 2, 2012), available at https://www.regulations.gov/docket/FTC-2022-0036 (discussing how dealers conceal loan packing by expressing 
an increase in price in terms of monthly payment); Att'ys General of 
31 States & DC, Comment Letter on Public Roundtables: Protecting 
Consumers in the Sale and Leasing of Motor Vehicles, Project No. 
P104811, Submission No. 558507-00112 at 5 (Apr. 13, 2012), available 
at https://www.regulations.gov/docket/FTC-2022-0036 (discussing the 
``age-old auto salesperson's trick'' of quoting monthly payment 
prices without disclosing the quote includes the cost of optional 
items the customer has not yet agreed to purchase).
    \69\ Liberty Chevrolet, No. 1:20-cv-03945 at ]] 9, 26 (S.D.N.Y. 
May 21, 2020); Press Release, N.Y. State Att'y Gen., Attorney 
General James Delivers Restitution to New Yorkers Cheated by Auto 
Dealership (Nov. 17, 2020), https://ag.ny.gov/press-release/2020/attorney-general-james-delivers-restitution-new-yorkers-cheated-auto-dealership (dealership targeted Chinese-speakers for unlawful 
payment packing); Military Consumer Financial Workshop (July 19, 
2017), https://www.ftc.gov/news-events/events-calendar/military-consumer-workshop (panelist discussing servicemembers experiencing 
payment packing at 19:21); see also Fed. Trade Comm'n, Staff 
Perspective: A Closer Look at the Military Consumer Financial 
Workshop 2-3 (Feb. 2018), https://www.ftc.gov/system/files/documents/reports/closer-look-military-consumer-financial-workshop-federal-trade-commission-staff-perspective/military_consumer_workshop_-_staff_perspective_2-2-18.pdf 
(explaining the unique situation of servicemembers as having steady 
paychecks that make them attractive customers for dealers, while 
having no or minimal credit history means they qualify for less 
advantageous credit terms and higher interest rate financing).
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    In other instances, dealers might wait until late in the 
transaction to mention add-ons, and then do so in a misleading manner. 
For example, according to an FTC study, there were situations where 
dealers waited until the financing stage to mention add-ons, after 
consumers believed they had agreed on terms, and even though many add-
ons have nothing to do with financing and were not mentioned at all 
during the sales process or when prices were initially negotiated.\70\ 
According to FTC enforcement actions, dealers also have represented 
that add-ons are required when in fact they are not,\71\ have 
misrepresented the purported benefits of add-ons, and have failed to 
disclose material limitations.\72\
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    \70\ See, e.g., Buckle Up, supra note 15, at 6 (observing that 
the introduction of ``add-ons during financing discussions caused 
several participants' total sale price to balloon from the cash 
price'') & id. at 9 (observing for most consumers in the study, 
``add-ons did not come up until the financing process, if at all, 
after a long car-buying process and at a time when the consumer 
often felt pressure to close the deal'') & id. at 8-9 (noting most 
study participants' contracts included add-ons charges, but many 
``were unclear what those add-ons included, and sometimes did not 
realize they had purchased any add-ons at all'') & id. at 7 
(explaining situations where the consumer reached the financing 
office after negotiating with the sales staff, and were then told 
the agreed upon price was not compatible with key financing terms--
for example, a promised rebate or discount could not be combined 
with an advertised interest rate); Liberty Chevrolet, No. 1:20-cv-
03945 at ] 17 (S.D.N.Y. May 21, 2020).
    \71\ Liberty Chevrolet, No. 1:20-cv-03945 at ]] 12-19 (S.D.N.Y. 
May 21, 2020) (alleging deceptive and unauthorized add-on charges in 
consumers' transactions); Universal City Nissan, No. 2:16-cv-07329 
at ]] 59-64 (C.D. Cal. Sept. 29, 2016) (deceptive and unauthorized 
add-on charges in consumers' transactions); TT of Longwood, No. C-
4531 at ]] 6, 9 (F.T.C. July 2, 2015) (misrepresentations regarding 
prices for added features); see also Auto Buyer Study, supra note 
11, at 14 (``Several participants who thought that they had not 
purchased add-ons, or that the add-ons were included at no 
additional charge, were surprised to learn, when going through the 
paperwork, that they had in fact paid extra for add-ons. This is 
consistent with consumers' experiencing fatigue during the buying 
process or confusion with a financially complex transaction, but 
would also be consistent with dealer misrepresentations.'').
    \72\ Complaint, Nat'l Payment Network, Inc., No. C-4521 at ]] 4-
14 (F.T.C. May 4, 2015) (alleging failure to disclose fees 
associated with financing program; misleading savings claims in 
advertisements); Complaint, Matt Blatt, Inc., No. C-4532 at ]] 4-13 
(F.T.C. May 4, 2015) (alleging failure to disclose fees associated 
with financing program; misleading savings claims); Buckle Up, supra 
note 15, at 10 (noting some Auto Buyer Study participants did not 
fully understanding material aspects of extended warranties or 
service plans they purchased and ``were surprised to discover during 
the interview that their plans had unexpected limitations'' or 
``they had to pay out-of-pocket for repairs or services that were 
not covered''; for example, one ``consumer purchased a `Lifetime' 
maintenance plan, only to discover later that he received a one-year 
plan that covered periodic oil changes''). Cf. Consent Order, 
Santander Consumer USA, Inc., CFPB No. 2018-BCFP-0008 at ]] 10-16 
(Nov. 20, 2018) (finding defendant sold GAP product allegedly 
providing ``full coverage'' to consumers with loan-to-value ratios 
(``LTVs'') above 125%, when in fact coverage is limited to 125% of 
LTV).
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    Indeed, in a recent enforcement proceeding brought by the FTC, the 
agency cited a survey finding that 83% of consumers from ten dealership 
locations within the same motor vehicle dealership group--the 
thirteenth largest dealership group in the country in 2020, as ranked 
by total revenue--were charged for add-on products or services that 
they did not authorize or as a result of deceptive claims that they 
were required to purchase them.\73\
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    \73\ N. Am. Auto. Servs., No. 1:22-cv-0169 at ] 27 (N.D. Ill. 
Mar. 31, 2022); WardsAuto, WardsAuto 2020 Megadealer 100, https://www.wardsauto.com/dealers/wardsauto-2020-megadealer-100-industry-force (last visited Apr. 25, 2022) (listing Napleton Automotive 
Group at the 13th-ranked dealership group by total revenue).
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    One participant in an FTC qualitative study of consumers' car 
buying experiences summed up these issues during an interview after 
having purchased a vehicle. The consumer purchased a $2,000 service 
contract that the dealer falsely said was free, and a $900 GAP 
insurance contract that the dealer falsely said was mandatory, and 
learned about these purchases during the study interview. This consumer 
remarked:
    I feel I've been taken advantage of, to be honest with you. Even 
though I thought that I was getting a great deal with the interest 
rate, but I now see that they're also very sneaky about putting stuff 
on your paperwork. They only let you skim through the paperwork that 
you have to sign and they just kind of tell you what it is. This is 
this, this is that, this is this, and then you just sign it away. 
You're so tired, you're so worn down, you don't want to be there no 
more. You just want to get it done and over with. They take advantage 
of that. Yes, they still play this friendly card, you know, thank you 
for your business card kind of thing. Like I said, they never lose. 
They never lose.\74\
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    \74\ Auto Buyer Study: Appendix, supra note 66 (Study 
participant 152288 at 130; see also Study participant 180267 at 202 
(dealership included a charge for GAP insurance in the final 
paperwork but not in retail sales contract); Study participant 
146748 at 296 (consumer learned during interview with FTC that 
consumer purchased GAP insurance: ``maybe they're just throwing that 
in there without telling you.'')).
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III. Law Enforcement Actions and Other Responses

    To address these types of unfair and deceptive practices in the 
motor vehicle industry, the Commission has brought enforcement actions 
and engaged in other efforts. In the last ten years, the Commission has 
brought more than fifty law enforcement actions and led two law 
enforcement sweeps to protect consumers in the motor vehicle 
marketplace, including one that involved 181 state enforcement 
actions.\75\
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    \75\ Fed. Trade Comm'n, Enforcement Cases Tagged with 
Automobiles, https://www.ftc.gov/legal-library/browse/cases-proceedings?sort_by=field_date&items_per_page=20&search=&field_competition_topics=All&field_consumer_protection_topics=All&field_federal_court=All&field_industry=1382&field_case_status=All&field_enforcement_type=All&search_matter_number=&search_civil_action_number=&start_date=&end_date= (last visited Apr. 25, 2022); Press Release, Fed. Trade 
Comm'n, FTC Announces Sweep Against 10 Auto Dealers (Jan. 9, 2014), 
https://www.ftc.gov/news-events/press-releases/2014/01/ftc-announces-sweep-against-10-auto-dealers; Press Release, Fed. Trade 
Comm'n, Multiple Law Enforcement Partners Announce Crackdown on 
Deception, Fraud in Auto Sales, Financing and Leasing (Mar. 26, 
2015), https://www.ftc.gov/news-events/press-releases/2015/03/ftc-multiple-law-enforcement-partners-announce-crackdown.
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    To complement its law enforcement efforts, the FTC's Bureau of 
Consumer Protection and the Bureau of Economics recently published two 
reports on the results of a qualitative study on consumer experiences 
while purchasing a motor vehicle.\76\ The study found that many 
participating consumers were left in the dark about key terms. 
Consumers

[[Page 42018]]

recalled dealers renegotiating vehicle prices at different stages of 
the transaction and being confused about the price of the vehicle.\77\ 
Despite the lengthy transaction, many study participants felt review of 
the final documents was rushed and were surprised to learn of 
additional add-on charges in their contracts.\78\
---------------------------------------------------------------------------

    \76\ Buckle Up, supra note 15; Auto Buyer Study, supra note 11.
    \77\ Buckle Up, supra note 15, at 5-7.
    \78\ Buckle Up, supra note 15, at 9.
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    These are long-standing issues.\79\ In 2011, the agency reached out 
to consumers through three motor vehicle roundtable events, reviewing 
over 100 comments from industry representatives, consumer advocates, 
and state enforcement agencies, among others who attended.\80\ Through 
these events and comments, consumers expressed confusion regarding 
aspects of the financing process and commented that they were surprised 
when they reached the dealership that the price advertised was not 
available to them.\81\
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    \79\ See The Road Ahead: Selling Financing, and Leasing Motor 
Vehicles, Transcript: Session 2, Washington DC (Nov. 2011), pp. 19-
23.
    \80\ The FTC hosted three roundtable events requesting public 
comments to gather information about possible consumer protection 
issues that may arise in the sale, financing, and leasing of motor 
vehicles. These events took place from April to November 2011 in 
Detroit, Austin, and Washington DC. The Road Ahead: Selling 
Financing, and Leasing Motor Vehicles (Apr. 2011, Aug. 2011, and 
Nov. 2011), https://www.ftc.gov/news-events/events-calendar/2011/08/road-ahead-selling-financing-leasing-motor-vehicles.
    \81\ See Comment Letters on Public Roundtables: Protecting 
Consumers in the Sale and Leasing of Motor Vehicles, Project No. 
P104811, Submission Nos. 558507-00015, 558507-00026, 558507-00046, 
558507-00051, 558507-00094, 558507-00099, available at https://www.regulations.gov/docket/FTC-2022-0036; Consumers for Auto 
Reliability and Safety, Comment Letter on Public Roundtables: 
Protecting Consumers in the Sale and Leasing of Motor Vehicles, 
Project No. P104811 at 5 (Apr. 1, 2012), https://www.ftc.gov/sites/default/files/documents/public_comments/public-roundtables-protecting-consumers-sale-and-leasing-motor-vehicles-project-no.p104811-00108/00108-82875.pdf (noting military command has gone 
as far as banning servicemembers from conducting business from 
certain auto dealerships because of ``abusive auto sales and 
financing practices.'').
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    The Commission's law enforcement partners have also brought actions 
addressing unfair and deceptive practices in the motor vehicle 
industry. For example, the Consumer Financial Protection Bureau has 
taken action against third-party motor vehicle financing entities in 
matters that raise similar, and sometimes identical, claims of 
deceptive and unfair practices as were at issue in FTC cases.\82\
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    \82\ The Consumer Financial Protection Bureau has brought at 
least 16 enforcement actions involving motor vehicles, financing, or 
add-on products and services. See Santander Consumer USA Inc., No. 
2020-BCFP-0027 at ]] 8-50 (Dec. 22, 2020) (finding auto finance 
company provided inaccurate records to credit reporting agencies); 
Nissan Motor Acceptance Corp., No. 2020-BCFP-0017 at ]] 46-52 (Oct. 
13, 2020) (finding auto finance company misrepresented financing 
extension agreements, repossessions, and limitations to consumer 
bankruptcy protections); Lobel Fin. Corp., No. 2020-BCFP-0016 at ]] 
8-22 (Sept. 21, 2020) (finding auto-loan servicer charged consumers 
unfair add-on charges in the form of Loss Damage Waiver premiums); 
Santander Consumer USA Inc., No. 2018-BCFP-0008 at ]] 6-30 (Nov. 20, 
2018) (finding auto finance company sold GAP to consumers with LTV 
over 125%, misrepresenting such consumers would be fully covered 
with total loss); Wells Fargo Bank, N.A., No. 2018-BCFP-0001 at ]] 
27-39 (Apr. 20, 2018) (finding bank imposed duplicative or 
unnecessary forced-placed auto loan insurance on consumers); Toyota 
Motor Credit Corp., No. 2016-CFPB-0002 at ]] 12-23 (Feb. 2, 2016) 
(finding auto finance company engaged in discriminatory pricing 
markup for motor vehicle financing, without regard to credit 
worthiness); Y King S. Corp., No. 2016-CFPB-0001 at ]] 73-75 (Jan. 
21, 2016) (finding used car dealer failed to disclose mandatory add-
ons as financing charge); Interstate Auto Grp., Inc. & Universal 
Acceptance Corp., No. 2015-CFPB-0032 at ]] 12-51 (Dec. 17, 2015) 
(finding dealership and financing company reported information they 
knew or had reasonable cause to believe was inaccurate to credit 
reporting entities, harming consumer credit); Westlake Servs., LLC, 
No. 2015-CFPB-0026 at ]] 7-90 (Sept. 30, 2015) (finding indirect 
auto financing entity used illegal debt collection tactics); Fifth 
Third Bank, No. 2015-CFPB-0024 at ]] 8-23 (Sept. 28, 2015) (finding 
discrimination against loan applicants in credit applications based 
on characteristics such as race and national origin); Am. Honda Fin. 
Corp., No. 2015-CFPB-0014 ]] at 9-24 (Jul. 14, 2015) (same); 
DriveTime Auto Grp., Inc., No. 2014-CFPB-0017 at ]] 4-60 (Nov. 19 
2014) (finding buy-here-pay-here dealership made harassing debt 
collection calls and provided inaccurate credit information to 
credit reporting agencies); First Investor Fin. Servs. Grp., Inc., 
No. 2014-CFPB-0012 at ]] 4-37 (Aug. 20, 2014) (finding auto 
financing company provided inaccurate records to credit reporting 
agencies); Ally Fin. Inc., No. 2013-CFPB-0010 at ]] 7-27 (Dec. 20, 
2013) (finding auto lender charged discriminatory pricing to 
African-American, Hispanic, and Asian and Pacific Islander 
borrowers); U.S. Bank Nat'l Ass'n, No. 2013-CFPB-0004 at ]] 14-28 
(June 26, 2013) (finding bank failed to properly disclose all the 
fees charged to participants in the companies' Military Installment 
Loans and Educational Services auto loans program, and 
misrepresented the true cost and coverage of add-on products 
financed along with the auto loans); Dealers' Fin. Servs., LLC, No. 
2013-CFPB-0004 at ]] 10-22 (June 2013) (finding financing company 
made deceptive statements regarding the cost of add-on products and 
the scope of coverage of the Vehicle Service Contract).
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    States have also taken measures to address consumer protection 
issues in the motor vehicle industry. In addition to participating in 
law enforcement sweeps with the FTC,\83\ state regulators and Attorneys 
General have independently filed more than 200 actions alleging 
deceptive and unlawful conduct by motor vehicle dealerships across the 
country.\84\
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    \83\ Operation Steer Clear and Operation Ruse Control brought 
with state law enforcement partners around the nation and Canada, 
encompassed over 246 enforcement actions. Press Release, Fed. Trade 
Comm'n, Multiple Law Enforcement Partners Announce Crackdown on 
Deception, Fraud in Auto Sales, Financing and Leasing (Mar. 26 
2015), https://www.ftc.gov/news-events/press-releases/2015/03/ftc-multiple-law-enforcement-partners-announce-crackdown.
    \84\ For example, in a recent action, California Attorney 
General's office sued a dealership chain under state consumer 
protection laws for deceiving consumers about add-on product charges 
and misrepresenting consumers' income on credit applications; the 
alleged practices specifically targeted low-income consumers with 
subprime credit. People of the State of California v. Paul Blanco's 
Good Car Co. Auto Grp., No. RG19036081 (Alameda County Super. Ct. 
Sept. 2019).
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    Some states have also taken legislative or regulatory action.\85\ 
For example, to ``ensure that dealers do not add in hidden or 
undisclosed costs after the price for a vehicle has been advertised,'' 
Oregon promulgated a rule that requires dealerships to state an 
``offering price'' which is the actual offer and amount the consumer 
can pay to own the vehicle, excluding only taxes, license, registration 
costs, environmental fees, and a document processing fee.\86\ 
California and Wisconsin have similarly enacted codes that make it 
unlawful for dealerships to advertise a total price without including 
additional costs to the purchaser outside the mandatory tax, title, and 
registration fees.\87\ Other states, like Indiana, have enacted codes 
that prohibit the sale of add-ons in certain circumstances.\88\
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    \85\ See, e.g., Cal. Veh. Code sec. 11713.1(b)-(c); Or. Admin. 
R. 137-020-0020(3)(c); Wis. Admin. Code. Trans 139.03(3).
    \86\ Or. Admin. R. 137-020-0020(3)(c); Official Commentary, Or. 
Admin. R. 137-020-0020(3)(c).
    \87\ Cal. Veh. Code sec. 11713.1(b)-(c); Wis. Admin. Code. Trans 
139.03(3).
    \88\ Ind. Code sec. 24-4.5-3-202 (3)(e)(ix) (2018) (prohibiting 
the sale of any GAP program when the LTV <80%).
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IV. Section-by-Section Analysis

    Based on its enforcement and other experience, the Commission 
proposes specific legal restrictions to address deceptive and unfair 
conduct by motor vehicle dealers. Thus, the Commission is proposing a 
rule requiring dealers, whether acting directly or indirectly, to 
refrain from misrepresentations, provide for material disclosures at 
key points in the transaction, refrain from the sale of deceptive or 
unfair add-on products, and require retention of dealers' 
advertisements and consumer transaction documents.
    While the proposed rule is an important step in the effort to 
prevent harm to consumers in the motor vehicle marketplace, a 
comprehensive approach is needed to address the important consumer 
protections at issue. Therefore, in addition to this rulemaking 
initiative, the Commission intends to continue law enforcement, as well 
as its consumer education and other efforts, to ensure that consumers 
can make informed decisions about

[[Page 42019]]

purchasing, financing, and leasing motor vehicles. The Commission also 
intends to continue its constructive engagement with consumer and 
dealer groups and other stakeholders.
    The Commission invites written comments on the proposed rule, and, 
in particular, answers to the specific questions set forth below.

A. Section 463.1: Authority

    Proposed Sec.  463.1 identifies the statutory authority under which 
the Commission proposes to promulgate this Rule to prevent unfair or 
deceptive acts or practices in connection with the sale, lease, or 
financing of motor vehicles.

B. Section 463.2: Definitions

    Proposed Sec.  463.2 contains definitions for the following terms: 
``Add-on'' or ``Add-on Product(s) or Service(s),'' ``Add-on List,'' 
``Cash Price without Optional Add-ons,'' ``Clearly and Conspicuously,'' 
``Dealer'' or ``Motor Vehicle Dealer,'' ``Express, Informed Consent,'' 
``GAP Agreement,'' ``Government Charges,'' ``Material'' or 
``Materially,'' ``Motor Vehicle,'' and ``Offering Price.'' Each of 
these terms is used in the proposed rule.

C. Section 463.3: Prohibited Misrepresentations

    Section 463.3 of the proposed rule would prohibit motor vehicle 
dealers from making certain misrepresentations, to address the 
deceptive practices surrounding motor vehicle transactions discussed 
above and emerging from the landscape of enforcement actions, 
workshops, industry and consumer studies, and consumer interviews and 
complaints. As discussed in Section III above, a representation, 
omission, or practice is deceptive if it is likely to mislead consumers 
acting reasonably under the circumstances and is material to 
consumers.\89\
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    \89\ See supra note 53 (citing FTC Policy Statement on 
Deception).
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    This section seeks to prohibit deceptive representations to 
consumers, clarify dealers' obligations under the law, and ensure that 
motor vehicle dealers compete on a level playing field. The prohibited 
misrepresentations in this section of the proposed rule are material 
because they are likely to affect a consumer's choices, such as whether 
to visit a particular dealership or enter into a transaction.\90\ These 
misrepresentations also harm consumers and divert business from 
reputable dealerships that provide truthful advertising to consumers. 
Consumers who select and travel to dealerships based on an advertised 
offer, only to learn late in the process (if at all) that the 
advertised offer does not apply, have often spent hours trying to 
purchase a car. Even if they notice and successfully resist later-added 
fees, or leave after learning that advertised discounts and rebates do 
not apply to them, misleading advertisements cause them to waste hours 
driving to and visiting the dealership.\91\ For many consumers, 
however, walking away is not a realistic option--for example, 
restarting the hours-long process at another dealership might mean 
having to take an additional day off work, and for those who cannot 
afford a second car, finding other means of transportation to travel to 
another dealership. Thus, even if they somehow learn that they are 
paying more than what was advertised, consumers might just sign the 
deal rather than start the entire process anew. In other instances, as 
discussed below, consumers learn that they did not receive the offer as 
represented only after they enter into the contract and end up spending 
hundreds or even thousands of dollars more than they were led to 
believe.
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    \90\ As noted above, ``material''--as used in the proposed rule 
and throughout this Notice of Proposed rulemaking--means likely to 
affect the consumer's conduct or decisions with regard to a product 
or service. See supra note 53 (citing FTC Policy Statement on 
Deception); In re Sanctuary Belize Litig., 482 F. Supp. 3d 373, 397 
(D. Md. 2020) (``Representations with respect to . . . [a product's] 
cost are also presumptively material.'') (citing In re Thompson Med. 
Co., Inc., 104 F.T.C. 648 (1984)); see also FTC v. Crescent Pub. 
Grp., Inc., 129 F. Supp. 2d 311, 321 (S.D.N.Y. 2001).
    \91\ See, e.g., Matthew Jones, Bruce Kobayashi & Jason O'Connor, 
Economics at the FTC: Non-Price Merger Effects and Deceptive 
Automobile Ads 12-26 (2018), also published at 53 Rev. Indust. Org. 
593 (2018), https://www.ftc.gov/system/files/documents/reports/economics-ftc-non-price-merger-effects-deceptive-automobile-ads/1812-be-rio.pdf (developing and discussing a model for quantifying 
the consumer injury from deceptive motor vehicle ads, in which 
injury occurs because such ads persuade consumers ``to spend time 
and effort to visit the dealership, when they might otherwise have 
pursued a legitimate offer elsewhere'').
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    Section 463.3(a) of the proposed rule would prohibit 
misrepresentations concerning ``[t]he costs or terms of purchasing, 
financing, or leasing a vehicle.'' This provision would bar deceptive 
practices surrounding, among other things, the total cost, price for 
added features, other charges, terms and finality of financing, and 
availability of discounts.\92\ The cost or price of a vehicle is 
material--it is likely to affect a consumer's conduct, including 
whether to purchase a particular vehicle at a particular dealership.
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    \92\ See, e.g., Liberty Chevrolet, No. 1:20-cv-03945 at ]] 10-11 
(S.D.N.Y. May 21, 2020) (alleging false ads stating a certain price 
but charging consumers higher prices); Tate's Auto Ctr., No. 3:18-
cv-08176-DJH at ]] 38-46 (D. Ariz. July 31, 2018) (alleging false 
ads touting attractive terms but concealing (i) ads were for lease 
offers only and required substantial initial payment, (ii) discounts 
were subject to material limitations, or (iii) other legally 
required disclosures); Complaint, In re Cowboy AG, LLC, No. C-4639 
at ]] 7-16 (F.T.C. Jan. 4, 2018) (alleging false ads touting 
attractive terms, but concealing substantial down payments, offers 
were for leases and not purchases, material eligibility 
restrictions, and other legally required disclosures); Universal 
City Nissan, No. 2:16-cv-07329 (C.D. Cal. Sept. 29, 2016) (alleging 
misrepresentation of lease, credit, or purchase terms; lease terms 
were for purchases; add-ons were authorized, free, or required; and 
the finality of financing transactions or consequences when 
financing falls through. Failing to disclose TILA/CLA trigger 
terms); Complaint, In re Jim Burke Automotive, Inc., No. C-4523 at 
]] 6-14 (F.T.C. May 4, 2015) (alleging misrepresentations regarding 
vehicle purchase price and promising prices and discounts not 
generally available to consumers); Complaint, In re City Nissan, 
Inc., No. C-4524 at ]] 8-10, 12 (F.T.C. May 4, 2015) (alleging 
misrepresentations regarding lease and finance terms); TT of 
Longwood, No. C-4531 at ]] 6-12 (F.T.C. July 2, 2015) (alleging 
misrepresentations regarding vehicle purchase price and prices for 
added features, promising prices and discounts not generally 
available to consumers, and misrepresentations regarding finance and 
lease terms); Complaint, In re Courtesy Auto Grp., Inc., No. 9359 at 
]] 5-7 (F.T.C. Jan. 7, 2014) (alleging misrepresentation regarding 
lease terms); Complaint, In re New World Auto Imports, Inc., No. C-
4437 at ]] 8-11 (F.T.C. Feb. 20, 2014) (alleging misrepresentations 
regarding monthly finance payments and lease terms); Complaint, In 
re Ramey Motors, Inc., No. C-4354 at ]] 4-5 (F.T.C. Apr. 19, 2012) 
(alleging false ads promising to pay off consumers' existing motor 
vehicle debt and failing to disclose legally required financing 
terms); Complaint, In re Billion Auto, Inc., No. C-4356 at ]] 4-6 
(F.T.C. May 1, 2012) (alleging false ads promising to pay off 
consumers' existing motor vehicle debt and failing to disclose 
legally required financing and leasing terms.); see also Buckle Up, 
supra note 15, at 5 (noting ``[a]dvertisements with misleading 
financing terms (as well as those with deceptive price and discount 
offers) remain a concern, and stating ``[d]ealers should make only 
accurate and non-misleading advertising claims to consumers, 
advertise terms that are actually available, and clearly and 
conspicuously disclose material qualifications or limitations on any 
advertised deal''); Auto Buyer Study, supra note 11, at 14 (noting, 
in a 2016 study by the Consumer Financial Protection Bureau, 
``consumers reported that lenders insisted that the purchase of add-
ons were necessary for the financing to be approved'').
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    Section 463.3(b) of the proposed rule would prohibit 
misrepresentations concerning any ``costs, limitation, benefit, or any 
other Material aspect of an Add-on Product or Service.'' As discussed 
above, add-ons are a particularly problematic area in auto sales and 
financing. The cost and coverage of an add-on is likely to affect a 
consumer's conduct, including the consumer's decision to purchase the 
product or service.
    Section 463.3(c) of the proposed rule would prohibit 
misrepresentations regarding ``[w]hether the terms are, or transaction 
is, for financing or a lease.'' If a dealer advertises vehicles for low 
monthly payments or other terms that

[[Page 42020]]

apply in financing offers, but the offer is actually for a lease only, 
that conduct misleads consumers.\93\ These representations are likely 
to affect consumers' conduct, including by causing consumers to enter 
into a monetary transaction for a product they do not want (borrowing 
instead of owning), or, if the true circumstances are revealed prior to 
consummation of the transaction, to waste time traveling to the 
dealership and potentially spending hours on the sales floor and 
financing office.
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    \93\ See Tate's Auto Ctr., No. 3:18-cv-08176-DJH at ]] 38-39 (D. 
Ariz. July 31, 2018) (alleging false ads touting attractive terms 
but concealing ads were for lease offers only); Complaint, In re TC 
Dealership, L.P., No. C-4536 at ]] 10, 13 (F.T.C. Aug. 13, 2015) 
(same); Cowboy AG, LLC, No. C-4639 at ]] 9-12 (F.T.C. Jan. 4, 2018) 
(same); New World Auto Imports, No. 3:16-cv-02401-K at ]] 36-38 
(N.D. Tex. Aug. 18, 2016) (alleging misrepresentation that terms 
were for financing instead of leasing); Universal City Nissan, No. 
2:16-cv-07329 at ]] 28-37, 44 (C.D. Cal. Sept. 29, 2016) (alleging 
advertisements with key terms that were not generally available).
---------------------------------------------------------------------------

    Section 463.3(d) of the proposed rule would prohibit 
misrepresentations concerning ``[t]he availability of any rebates or 
discounts that are factored into the advertised price but not available 
to all consumers.'' When dealers advertise rebates and discounts, or 
offer prices that factor in such rebates and discounts, but in fact 
those rebates and discounts are not available to the typical consumer, 
but only a select set of customers, such conduct induces the consumer 
to select and transact with the dealer under false pretenses.\94\ In 
other instances, the advertised rebates and discounts might apply only 
to the most expensive versions of the make and model.\95\ Consumers may 
learn they do not qualify for these advertised rebates or discounts, if 
at all, only after they spend time traveling to the dealership or at 
the end of the financing stage.\96\
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    \94\ See Tate's Auto Ctr., No. 3:18-cv-08176-DJH, ]] 41-43 (D. 
Ariz. July 31, 2018) (alleging false ads touting attractive terms 
and discounts but concealing material limitations); Complaint, In re 
JS Autoworld, Inc., No. C-4535 at ]] 8-9 (F.T.C. Aug. 13, 2015) 
(alleging false ads touting prices but concealing discounts with 
material eligibility limitations); TC Dealership, L.P., No. C-4536 
at ]] 7-9 (F.T.C. Aug. 13, 2015) (alleging false ads touting 
attractive prices but concealing discounts were subject to material 
eligibility limitations and trade-in requirement); TXVT Ltd. P'ship, 
No. C-4508 at ] 14 (F.T.C. Feb. 12, 2015) (alleging false ads failed 
to disclose that it would match consumers' income tax refunds only 
up to $1,000); Timonium Chrysler, No. C-4429 at ]] 4-5 (F.T.C. Jan. 
28, 2014) (alleging false ads touting pricing and discounts but 
concealing material qualifications and restrictions); TT of 
Longwood, No. C-4531 at ]] 6, 9 (F.T.C. July 2, 2015) (alleging 
promises of prices and discounts not generally available to 
consumers); Jim Burke Automotive, No. C-4523 at ]] 6-13 (F.T.C. May 
4, 2015) (alleging promises of prices and discounts not generally 
available to consumers); see also Auto Buyer Study, supra note 11, 
at 8 (``A number of [study] participants were attracted by 
promotional offers in ads that they did not qualify for, but did not 
realize that they did not qualify until they got to the dealer. Some 
did not learn that they did not qualify until they got to the 
financing stage of the transaction.'').
    \95\ Ganley Ford West, No. C-4428 at ] 5 (F.T.C. Jan. 28, 2014) 
(alleging false ads touting price discount but concealing offer was 
limited to certain high-end models).
    \96\ For example, one consumer had reached a three-year 
financing agreement with the dealership salesman over the phone, 
which would include a $4,300 rebate to reduce their purchase price, 
only to walk into the dealership and be told at the financing office 
the rebates were only offered with seven-year financing agreements. 
Auto Buyer Study, supra note 11, at Supp. Appx 90-91.
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    Section 463.3(e) and (f) of the proposed rule would prohibit 
misrepresentations surrounding ``[t]he availability of vehicles at an 
advertised price'' and representations that a consumer has been or will 
be ``preapproved or guaranteed for any product, service, or term.'' 
This provision would prohibit dealers from first touting low prices or 
other attractive terms for specific vehicles and inducing consumers to 
spend time traveling to the dealership and pursuing the offer, but then 
claiming, among other things, that the advertised vehicle is no longer 
available, no longer available at the advertised price, or that the 
financing offer is only available to those with high credit scores.\97\ 
To the extent that dealers are advertising prices, preapprovals, 
guaranteed rates, or other terms for military consumers, but then 
charging the same prices to other consumers or otherwise failing to 
honor the deal, the proposed rule would cover such conduct as well. 
This information is material because it is likely to affect consumers' 
conduct, including whether to spend time traveling to a particular 
dealership and pursuing a specific offer on a specific car.
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    \97\ Liberty Chevrolet, No. 1:20-cv-03945 at ]] 10-11 (S.D.N.Y. 
May 21, 2020) (alleging false ads stating a certain price but then 
charging consumers higher prices than advertised); Tate's Auto Ctr., 
No. 3:18-cv-08176-DJH at ]] 41-43 (D. Ariz. July 31, 2018) (alleging 
false ads touting attractive terms but concealing discounts were 
subject to material limitations); Complaint, Cowboy AG, No. C-4639 
at ]] 7-14 (F.T.C. Jan. 4, 2018) (alleging false ads touting 
attractive terms but concealing material eligibility restrictions 
and certain advertised vehicles not available for sale); Complaint, 
FTC v. Norm Reeves, Inc., No. 8:17-cv-01942 at ]] 28-30 (C.D. Cal. 
Nov. 3, 2017) (alleging deceptive representations regarding monthly 
payments being available to consumers while concealing credit 
restrictions); New World Auto Imports, No. 3:16-cv-02401-K at ]] 36-
38 (N.D. Tex. Aug. 18, 2016) (alleging deceptive representations 
regarding monthly and down payments being available to consumers 
with repossessions or foreclosures and concealing restrictions 
making the offer available only to consumers with good credit); 
Progressive Chevrolet Co., No. C-4578 at ]] 5-7 (F.T.C. June 13, 
2016) (alleging ads touting attractive terms but failure to disclose 
high credit score requirement); JS Autoworld, No. C-4535 at ]] 8-9 
(F.T.C. Aug. 13, 2015) (alleging false ads touting attractive prices 
but concealing discounts with material eligibility limitations); 
Complaint, TC Dealership, No. C-4536 at ]] 7-9 (F.T.C. Aug. 13, 
2015) (alleging false ads touting attractive price but concealing 
discounts were subject to material eligibility limitations and 
trade-in requirement); Complaint, FTC v. Ramey Motors, Inc., No. 
1:14-cv-29603, ]] 21-23 (S.D.W. Va. Dec. 11, 2014) (alleging false 
ads touting attractive terms but concealing substantial down 
payments or trade-in requirements); Timonium Chrysler., No. C-4429 
at ]] 4-5 (F.T.C. Jan. 28, 2014) (alleging false ads touting pricing 
and discounts but concealing material qualifications and 
restrictions); Ganley Ford West, No. C-4428 at ] 5 (F.T.C. Jan. 28, 
2014) (alleging false ads touting price discount but concealing 
offer was limited to certain high-end models); Complaint, United 
States v. Billion Auto, Inc., No. 5:14-cv-04118-MWB, ]] 38-40 (N.D. 
Iowa 2014) (alleging false ads touting attractive terms but 
concealing material eligibility limitations and significant extra 
costs); see also Adam J. Levitin, The Fast and the Usurious: Putting 
the Brakes on Auto Lending Abuses, 108 Geo. L.J. 1257, 1282 (2020), 
https://www.law.georgetown.edu/georgetown-law-journal/wp-content/uploads/sites/26/2020/05/Levitin_The-Fast-and-the-Usurious-Putting-the-Brakes-on-Auto-Lending-Abuses.pdf (discussing dealership tactic 
of advertising one vehicle and then claiming it has been sold to 
upsell consumer to a different vehicle).
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    Section 463.3(g) of the proposed rule would prohibit dealers from 
misrepresenting ``[a]ny Material information on or about a consumer's 
application for financing.'' Material misrepresentations on or about a 
consumer's financing application include instances in which dealers 
submit income information that is different from what consumers have 
stated that they earn, or alter the down payment amount from what the 
consumer has actually provided.\98\
---------------------------------------------------------------------------

    \98\ Tate's Auto Ctr., No. 3:18-cv-08176-DJH, ]] 18-21, 25 (D. 
Ariz. July 31, 2018) (alleging dealership falsified consumers' 
monthly income and down payments on financing applications and 
financing contracts); People of the State of California v. Paul 
Blanco's Good Car Co. Auto Grp., Case No. RG19036081 (Sept. 2019).
---------------------------------------------------------------------------

    Section 463.3(h) and (i) of the proposed rule would prohibit 
dealers from misrepresenting ``[w]hen the transaction is final or 
binding on all parties'' and making misrepresentations about 
``[k]eeping cash down payments or trade-in vehicles, charging fees, or 
initiating legal process or any action if a transaction is not 
finalized or if the consumer does not wish to engage in a 
transaction.'' These provisions are intended to curb yo-yo financing, 
which occurs when a dealer obtains a consumer's agreement to a deal 
that has not been finalized, allows the consumer to drive the vehicle 
off the lot, and then directs the consumer to return and engages in 
unlawful tactics, such as failing to give back a consumer's trade-in 
vehicle, while refusing to honor the deal or pressuring the consumer 
into entering a new deal.\99\ Yo-yo financing

[[Page 42021]]

is often made possible because a dealer misleads consumers, directly or 
by omission, about whether their financing is final, and subsequently 
applies pressure when revealing that the financing is not final, 
including by threatening to retain the consumer's cash down payment or 
trade-in vehicle unless the consumer agrees to a new financing 
contract.\100\ These tactics affect consumer conduct, including whether 
to enter into a new deal with less beneficial terms for the consumer. 
Several states have enacted statutes to protect consumers against this 
practice.\101\
---------------------------------------------------------------------------

    \99\ Universal City Nissan, No. 2:16-cv-07329 at ]] 67-72 (C.D. 
Cal. Sept. 29, 2016); State ex rel. Dewine v. Dads Car Lot Inc., No. 
13CV4036, 2014 Ohio Misc. LEXIS 10987, at *4 (Ct. Com. Pl. June 6, 
2014) (finding defendant violated state consumer sales protection 
act by including ``spot delivery'' document that allowed defendant 
to keep ``all funds on deposit''); Att'ys General of 31 States & DC, 
Comment Letter on Public Roundtables: Protecting Consumers in the 
Sale and Leasing of Motor Vehicles, Project No. P104811, Submission 
No. 558507-00112 at 4 (Apr. 13, 2012), available at https://www.regulations.gov/docket/FTC-2022-0036 (recommending, among other 
rules aimed at deterring yo-yo sales, FTC adopt rules that would 
require dealers to disclose the consumer's ``right to walk away'' if 
financing is rejected and, in the context of spot delivery, to 
disclose financing has not been finalized as well as the 
responsibilities and potential consequences for consumers); Legal 
Aid Justice Ctr., Comment Letter on Public Roundtables: Protecting 
Consumers in the Sale and Leasing of Motor Vehicles, Project No. 
P104811, Submission No. 558507-00066 (Jan. 30, 2012) available at 
https://www.regulations.gov/docket/FTC-2022-0036 (explaining that in 
a yo-yo sale the dealer misrepresents to the consumer credit has 
been finalized, when in fact the dealer treats the sale as 
contingent, retaining the ability call off or seize the vehicle 
later; a ``yo[hyphen]yo case can result in substantial distress to 
the person who has been tricked''; and ``the harm to the marketplace 
occurs when the consumer believes a credit sale has been completed 
and stops shopping for a car on credit''); Nat'l Consumer Law Ctr., 
In Harm's Way--At Home: Consumer Scams and the Direct Targeting of 
America's Military and Veterans 41 (May 2003), https://www.nclc.org/images/pdf/special_projects/military/report-scams-facing-military.pdf (listing ``spot delivery'' or ``yo-yo sales'' among 
scams commonly aimed at military members).
    \100\ See, e.g., Delvin Davis, Ctr. for Responsible Lending, 
Deal or No Deal: How Yo-Yo Scams Rig the Game against Car Buyers, 
submitted as an attachment to Comment #558507-00104 on Public 
Roundtables: Protecting Consumers in the Sale and Leasing of Motor 
Vehicles, Project No. P104811 at 1, 5-6 (Apr. 2, 2012), https://www.ftc.gov/sites/default/files/documents/public_comments/public-roundtables-protecting-consumers-sale-and-leasing-motor-vehicles-project-no.p104811-00104/00104-82860.pdf.
    \101\ See Alaska Stat. secs. 45.25.500, 45.25.610(c) 
(prohibiting dealers from transferring title to a trade-in vehicle 
or performing any repairs/reconditioning before completing sales 
transaction, and requiring specific disclosures to consumers 
regarding spot delivery); Ariz. Rev. Stat. sec. 44-1371 (prohibiting 
sale of trade-in before financing is finalized); Ark. Code. Ann. 
sec. 23-112-316 (prohibiting dealers from depositing money from 
consumer or selling a trade-in before financing is finalized and 
permitting consumer to cancel purchase if dealer changes any terms 
or consumer does not obtaining the financing agreed upon); Colo. 
Rev. Stat. sec. 6-1-708 (prohibiting spot delivery tactics and 
requiring dealers to return any collateral or down payment if 
financing is not approved and the consumer is required to return the 
vehicle); Nev. Rev. Stat. sec. 482.554(2)(a) (protecting against 
misrepresentations surrounding spot delivery); N.H. Rev. Stat. Ann. 
sec. 361-A:10-b (requiring dealers to return trade-in, deposit, and 
fees, if financing is not approved); Or. Rev. Stat. sec. 646A.090 
(requiring dealers to return trade-in vehicle if financing is not 
approved).
---------------------------------------------------------------------------

    Section 463.3(j) of the proposed rule would prohibit 
misrepresentations regarding ``[w]hether or when a Motor Vehicle Dealer 
will pay off some or all of the financing or lease on a consumer's 
trade-in vehicle.'' This provision would prohibit dealers from 
misrepresenting to consumers trading in a vehicle when the consumer 
owes more than the vehicle is worth, that the dealer will pay off that 
negative balance or negative equity when the consumer purchases a new 
vehicle. If the dealer does not pay off the negative balance but rather 
includes it in the new amount to be financed for the vehicle to be 
purchased, this sleight of hand (often buried in the financing 
paperwork) requires the consumer, not the dealer, to pay off the 
previous financing as promised.\102\ This provision would also prohibit 
dealers that are going out of business from representing that they will 
pay off liens if they do not, in fact, pay off the liens, and prohibit 
them from failing to pay off liens in a timely manner. This information 
is material because information about the amount the consumer is 
actually paying or will end up owing is likely to affect the consumer's 
decision to visit a particular dealership and purchase a particular 
vehicle.
---------------------------------------------------------------------------

    \102\ Universal City Nissan, No. 2:16-cv-07329 at ]] 28-34, 54-
55 (C.D. Cal. Sept. 29, 2016) (alleging failure to disclose 
remaining amount due on trade-in would be added to the consumer's 
new financing or lease balance); Ramey Motors, No. C-4354 at ] 4 
(F.T.C. Apr. 19, 2012) (alleging false ads promising to pay off 
consumers' existing motor vehicle debt); Billion Auto, No. C-4356 at 
] 4 (F.T.C. May 1, 2012) (alleging false ads promising to pay off 
consumers' existing motor vehicle debt); TXVT Ltd. P'ship, No. C-
4508 at ]] 7-11 (F.T.C. Feb. 12, 2015) (alleging false ads that 
consumers could exit existing debt or leases for $1); Complaint, In 
re Frank Myers Automaxx, LLC, No. C-4353 at ] 4 (F.T.C. Apr. 19, 
2012) (alleging false ads promising to pay off consumers' existing 
motor vehicle debt and leases); Key Hyundai of Manchester, No. C-
4358 at ] 6 (F.T.C. May 4, 2012) (alleging false ads promising to 
pay off consumers' existing motor vehicle debt and leases); see also 
Auto Buyer Study, supra note 11, at 13 (noting a participant was 
``surprised'' to learn during the study interview the dealer had 
rolled negative equity into her new financing).
---------------------------------------------------------------------------

    Section 463.3(k) of the proposed rule would prohibit 
misrepresentations that consumer reviews or ratings are unbiased, 
independent, or from ordinary consumers, and Sec.  463.3(l) of the 
proposed rule would similarly prohibit misrepresentations that ``the 
Dealer or any of its personnel or products or services is or was 
affiliated with, endorsed or approved by, or otherwise associated with 
the United States government or any Federal, State, or local government 
agency, unit, or department, including the United States Department of 
Defense or its Military Departments.'' The FTC has combatted such 
misrepresentations in enforcement actions.\103\ Claims that products 
and services are endorsed by other impartial consumers or the 
government are material to consumers' decision-making because a 
consumer is more likely to visit a dealership and select a vehicle that 
has been approved by an impartial consumer or a government entity.
---------------------------------------------------------------------------

    \103\ See Universal City Nissan, No. 2:16-cv-07329 at ]] 73-78 
(C.D. Cal. Sept. 29, 2016) (alleging posting by dealership of 
positive, five-star reviews on third-party websites that falsely 
purport to be objective or independent); Complaint, FTC v. Passport 
Imports, Inc., No. 8:18-cv-03118 at ] 20 (D. Md. Oct. 10, 2018) 
(alleging Defendants misled consumers by mailing notices that were 
similar to and had the same color scheme as notices manufacturers 
are required by the US Department of Transportation's NHTSA to use 
when sending information about recalls); Complaint, United States v. 
Sunkey Publ'g, Inc., No. 3:18-cv-01444 at ]] 14-112 (N.D. Ala. Sept. 
6, 2018) (alleging deceptive educational marketing and lead 
generation that targeted potential military recruits and used a 
series of false representations of military affiliation and 
endorsement to induce recruits to submit their information and agree 
to future contacts).
---------------------------------------------------------------------------

    Section 463.3(m) of the proposed rule would prohibit 
misrepresentations that ``consumers have won a prize or sweepstakes.'' 
\104\ Like the other provisions in Sec.  463.3, these claims are 
material and harm consumers by inducing a consumer to choose and 
transact with a particular dealership under false pretenses.
---------------------------------------------------------------------------

    \104\ See Fowlerville Ford, No. C-4433 at ] 4 (F.T.C. Feb. 20, 
2014) (alleging misrepresentation that consumers have won a prize 
that can be collected at a dealership).
---------------------------------------------------------------------------

    Section 463.3(n) of the proposed rule would prohibit 
misrepresentations regarding ``[w]hether, or under what circumstances, 
a vehicle may be moved, including across state lines or out of the 
country.'' This provision would prevent dealers from making 
misrepresentations about any liens or other restrictions that prevent 
or hinder consumers' ability to move the vehicle beyond certain 
boundaries. The manner in which a consumer can move a vehicle is likely 
to affect the consumer's decision to purchase a vehicle, including 
decisions of military consumers who may frequently need to move.
    Section 463.3(o) of the proposed rule would prohibit 
misrepresentations regarding ``[w]hether, or under what circumstances, 
a vehicle may be repossessed.'' This provision would prevent dealers 
from making

[[Page 42022]]

misrepresentations that they may repossess a vehicle, when they cannot. 
For example, the Servicemembers Civil Relief Act prohibits repossession 
of vehicles during a servicemember's period of military service without 
a court order as long as the servicemember either placed a deposit for 
the vehicle, or made at least one installment payment on the contract 
before entering military service.\105\ Thus, this provision would 
prevent dealers from representing that they could repossess military 
consumers' vehicles under these circumstances. Information about when a 
vehicle may be repossessed is likely to affect a consumer's conduct, 
including the consumer's conduct regarding which payments to prioritize 
while serving our country.
---------------------------------------------------------------------------

    \105\ 50 U.S.C. 3952.
---------------------------------------------------------------------------

    Section 463.3(p) of the proposed rule would prohibit 
misrepresentations of ``[a]ny of the required disclosures identified in 
this part,'' including but not limited to representations that limit or 
contradict the required disclosures. This prohibition against 
misrepresentations complements the disclosure requirements in the 
proposed rule.

D. Sec.  463.4: Disclosure Requirements

    Section 463.4 of the proposed rule would require key disclosures by 
dealers. The proposed rule would require that such disclosures be made 
in a clear and conspicuous manner, but would not prescribe the form 
that such disclosures must take.
    Proposed Sec.  463.4(a) through (e) would require disclosures 
regarding pricing and certain financing information. Providing 
consumers with accurate and timely pricing and financing information is 
critical, especially in the context of motor vehicle sales and leasing, 
where such information has proved singularly confusing to 
consumers.\106\ Such confusion is heightened when, as discussed above, 
advertisements list vehicle prices that are lower than that at which 
the dealer will sell or lease the vehicle, including because of 
incremental charges and fees added to an hours-long transaction as it 
develops.
---------------------------------------------------------------------------

    \106\ See, e.g., Buckle Up, supra note 15, at 5 (noting consumer 
confusion about how the vehicle price they were offered was 
determined and consumers did not understand they could negotiate 
price); id. at 9 (observing add-on products and services, which 
typically increase a vehicle's purchase price, were ``the single 
greatest area of confusion'' in the study); Att'ys General of 31 
States & DC, Comment Letter on Public Roundtables: Protecting 
Consumers in the Sale and Leasing of Motor Vehicles, Project No. 
P104811, Submission No. 558507-00112 at 5 (Apr. 13, 2012), available 
at https://www.regulations.gov/docket/FTC-2022-0036.
---------------------------------------------------------------------------

    Misleading and false price and financing information hinder 
consumers' ability to comparison shop, an essential element to a 
competitive market. If buyers can see and compare the actual prices and 
costs for the same or similar goods offered by different sellers, 
buyers can choose to visit the seller that offers the terms most 
important to them, instead of wasting time and expense exploring offers 
based on deceptive information. When price or cost information in the 
market are distorted, consumers are unable to effectively differentiate 
between sellers, and sellers trying to deal honestly with consumers are 
put at competitive disadvantage.
    Proposed Sec.  463.4(a) would require a motor vehicle dealer to 
disclose the true ``Offering Price'' of a vehicle in advertisements 
that reference specific vehicles or price or financing terms. Under the 
proposed rule, the ``Offering Price'' of a vehicle means ``the full 
cash price for which a dealer will sell or finance the motor vehicle to 
any consumer,'' excluding only required government charges.'' \107\
---------------------------------------------------------------------------

    \107\ In a similar vein, a number of states have enacted laws 
that require any advertised or quoted vehicle price to include any 
non-governmental fees charged by the dealer. See, e.g., Or. Admin R. 
137-020-0020(3)(c) (requiring any price stated in an ad or in a 
price quotation to be the offering price, excluding only taxes, 
license, and other specified fees); Cal. Veh. Code sec. 11713.1(b)-
(c) (making it a violation of the regulation to advertise the total 
price of a vehicle without including all costs to purchaser at the 
time of the sale, except taxes, registration, and other specified 
charges); Wis. Admin. Code Trans. 139.03(3) (requiring an advertised 
price include ``all charges that shall be paid by the purchaser to 
acquire ownership of the vehicle with the exception of sales tax, 
title and registration fees''); Oh. Admin. Code 109:4-3-16(B)(21) 
(prohibiting advertising ``any price for a motor vehicle unless such 
price includes all costs to the consumer except tax, title and 
registration fees, and a documentary service charge''); see also Ga. 
Dept. of Law Consumer Prot. Div., Auto Advertising & Sales Practices 
Enforcement Policies, 11 (``Advertised prices must state the actual 
total purchase price of the vehicle, excluding only government fees 
. . . . Any advertisement which lists a price `plus' some additional 
amount will be considered to be deceptive.''), https://consumer.georgia.gov/business-services/auto-advertising-and-sales-practices-enforcement-policies; accord N.Y.C. Admin Code sec. 20-
271(b)(1) (used vehicles must display the total selling price, 
inclusive of all dealer fees but exclusive of government charges); 
cf. Att'ys General of 31 States & DC, Comment Letter on Public 
Roundtables: Protecting Consumers in the Sale and Leasing of Motor 
Vehicles, Project No. P104811, Submission No. 558507-00112 at 5 
(Apr. 13, 2012), available at https://www.regulations.gov/docket/FTC-2022-0036 (recommending the FTC adopt a rule requiring all 
advertised prices and price quotes for motor vehicles include all 
required non-governmental fees).
---------------------------------------------------------------------------

    This provision would prohibit deceptive and unfair practices with 
respect to price and add-ons. Price is one of the most material pieces 
of information for a consumer in making an informed purchasing 
decision.\108\ Yet it is difficult for consumers to uncover the actual 
price for which a dealer will sell an advertised vehicle until visiting 
the dealership and spending hours on the lot. Sometimes dealers will 
tout prices based on dealer discounts, rebates, or other price 
reductions when such benefits are in fact subject to hidden or 
undisclosed restrictions that render them unavailable to typical 
customers.\109\ Other times, dealers hide or omit additional dealer 
charges, such as for document preparation fees, amounting to several 
hundred dollars.\110\ It is deceptive for dealers to advertise a price 
without disclosing material limitations or additional charges required 
by the dealer that are fixed and thus can be readily included in the 
price at the outset.\111\
---------------------------------------------------------------------------

    \108\ See, e.g., Sanctuary Belize Litig., 482 F. Supp. 3d at 397 
(``Representations with respect to . . . [a product's] cost are also 
presumptively material.'') (citing Thompson Med. Co., 104 F.T.C. 
648); see also Crescent Pub. Grp., 129 F. Supp. 2d at 321.
    \109\ See, e.g., Tate's Auto Ctr., No. 3:18-cv-08176-DJH at ]] 
41-43 (D. Ariz. July 31, 2018) (alleging defendants failed to 
adequately disclose advertised discount incentives were available to 
select consumers only); Progressive Chevrolet Co., No. C-4578 at ]] 
5-7 (F.T.C. June 13, 2016) (alleging respondents failed to disclose 
or disclose adequately that typical consumers cannot qualify for 
advertised terms); TT of Longwood, No. C-4531 at ]] 16-17 (F.T.C. 
July 2, 2015) (alleging respondent advertised discounts and prices 
but failed to adequately disclose various qualifications and 
restrictions that made incentives or prices unavailable to consumers 
generally); JS Autoworld, No. C-4535 at ]] 8-9 (F.T.C. Aug. 13, 
2015) (alleging prominently advertised price is not generally 
available to consumers); TC Dealership, L.P., No. C-4536 at ]] 7-9 
(F.T.C. Aug. 13, 2015) (same); Timonium Chrysler, No. C-4429 at ]] 
4-5 (F.T.C. Jan. 28, 2014) (alleging advertised prices and discounts 
but failed to disclose consumer would have to qualify for multiple 
rebates not generally available to them); Ganley Ford West, No. C-
4428 at ]] 4-5 (F.T.C. Jan. 28, 2014) (alleging advertised price 
discounts applied only to more expensive versions of vehicles 
featured in the ad).
    \110\ See, e.g., Liberty Chevrolet, No. 1:20-cv-3945 (S.D.N.Y. 
May 21, 2020) (alleging defendants advertised vehicles for sale at a 
specific price that failed to include additional fees dealer later 
tacked onto the price, resulting in higher sales prices than 
advertised); see also Press Release, State of Alaska, Dep't of Law 
State Settles Consumer Protection Case with Lithia Auto Dealers 
(Dec. 1, 2006), http://www.law.alaska.gov/press/releases/2006/120106-Lithia.html (announcing settlement with dealerships for 
charging ``doc prep fees '' not included in the advertised price of 
the vehicle, and noting such fees are ``nothing more than dealer 
profit'' and ``consumers often confuse'' them with governmental 
fees).
    \111\ Indeed, an entity that induces the first contact through 
false or misleading representation is liable under the FTC Act, 
regardless if the buyer later becomes fully informed. See, e.g., 
Resort Car Rental Sys., Inc. v. FTC, 518 F.2d 962, 964 (9th Cir. 
1975); FTC v. Gill, 71 F. Supp. 2d 1030, 1046 (C.D. Cal. 1999) 
(same), aff'd, 265 F.3d 944 (9th Cir. 2001).

---------------------------------------------------------------------------

[[Page 42023]]

    These practices are also unfair because they are likely to cause 
substantial injury: Consumers lose time when they pursue offers that 
are not actually available, and they may end up paying more for a 
vehicle than they expected, either because unexpected charges are not 
adequately disclosed until late in the transaction, or are never 
disclosed at all.\112\ By requiring disclosure of the true Offering 
Price upfront, Sec.  463.4(a) aims to curb this deceptive and unfair 
conduct, while producing the corollary benefit of increasing price 
competition among dealers, who would be able to compete on truthful, 
standard terms.\113\ Specifically, Sec.  463.4(a) would require 
disclosure of the Offering Price when dealers advertise a specific 
vehicle for sale as well as when any monetary amount or financing term 
is advertised.
---------------------------------------------------------------------------

    \112\ See, e.g., Liberty Chevrolet, No. 1:20-cv-03945 at ]] 12-
19 (S.D.N.Y. May 21, 2020) (alleging defendants falsely told 
consumers they were required to pay excess fees and taxes, and in 
other instances added such costs to the total price without 
consumers' knowledge or consent); Universal City Nissan, No. 2:16-
cv-07329 at ]] 59-64 (C.D. Cal. Sept. 29, 2016) (alleging defendants 
engaged in deceptive and unfair practices relating to add-on 
products, including charging consumers for add-ons the consumer 
rejected or did not consent to purchase); see also Buckle Up, supra 
note 15, at 6 (summarizing the frustrating and time-consuming 
experience of some consumers who negotiated what they thought was an 
agreed-upon price with a dealership's sales staff, only to face 
further rounds of negotiating with the dealer's financing office and 
the introduction of adds-on that caused the price to balloon), 
https://www.ftc.gov/reports/buckle-navigating-auto-sales-financing; 
Matthew Jones, Bruce Kobayashi & Jason O'Connor, Economics at the 
FTC: Non-Price Merger Effects and Deceptive Automobile Ads 12 
(2018), also published at 53 Rev. Indust. Org. 593 (2018), https://www.ftc.gov/system/files/documents/reports/economics-ftc-non-price-merger-effects-deceptive-automobile-ads/1812-be-rio.pdf (discussing 
the injurious effects of deceptive ads about motor vehicle sales and 
financing, including the time and effort spent by consumers visiting 
the dealership, when they might have otherwise pursued a legitimate 
offer elsewhere).
    \113\ The FTC has long considered the deceptive or unfair 
effects of ``drip pricing''--the colloquial term for the pricing 
practice that proposed Sec.  463.4(a) aims to curb--whereby firms 
advertise only part of a product's price and reveal other mandatory 
charges later in the buying process. In 2012, the FTC convened a 
workshop on drip pricing at which then-Chairman Leibowitz discussed 
the practice's potential to harm consumers by ``causing them to pay 
too much and to waste time searching'' goods and services with 
deceptively low prices. That same year, the FTC sent letters to 
numerous hotels warning against the practice of excluding mandatory 
``resort fees'' from quoted room rates and urging them to make total 
quoted prices inclusive of all unavoidable costs. See Mary W. 
Sullivan, Economic Analysis of Hotel Resort Fees, Fed. Trade. Comm'n 
(Jan. 2017) (concluding hotels could eliminate the potential harm 
and cost to consumers caused by price dripping by disclosing any 
mandatory fees upfront in the quoted price). Almost a decade later, 
complaints about mandatory fee disclosures persist. During a recent 
workshop to examine digital ``dark patterns,'' participants 
identified drip pricing as a leading issue in online pricing, with 
some suggesting the FTC implement a rule banning hidden fees and 
drip pricing. https://www.ftc.gov/news-events/events-calendar/bringing-dark-patterns-light-ftc-workshop. See Fed. Trade Comm'n, 
Staff Perspective: ``That's the Ticket'' Workshop (May 2020) (noting 
a preference for regulating drip pricing in the context of online 
advertising and sale of event tickets), https://www.ftc.gov/system/files/documents/reports/thats-ticket-workshop-staff-perspective/staffperspective_tickets_final-508.pdf. One model for all-in, 
upfront pricing are DOT's rules requiring airlines to include all 
mandatory fees in ticket display prices. Under these rules, whenever 
a carrier advertises a price for air transportation, that price must 
be the full price customers will have to pay. See 14 CFR part 399 
(implementing 49 U.S.C. 41712). Regardless of the market, whether 
air travel, hotels, or motor vehicles, the empirical evidence 
suggests price transparency leads to more informed consumers, lower 
and more uniform prices, and more competition among sellers. See, 
e.g., D. Andrew Austin & Jane G. Gravelle, Cong. Rsch. Serv., CRS 
Report for Congress: Does Price Transparency Improve Market 
Efficiency? Implications of Empirical Evidence in Other Markets for 
the Health Sector (July 24, 2007), https://fas.org/sgp/crs/secrecy/RL34101.pdf.
---------------------------------------------------------------------------

    This provision would further require that, upon receipt of a 
consumer inquiry about a specific vehicle or price or financing term 
for any vehicle, the dealer must disclose the Offering Price of that 
vehicle, and that if any part of such an inquiry or response is made in 
writing, the Offering Price must be disclosed in writing as well. This 
provision would require dealers to provide accurate information to 
consumers, including those beginning their vehicle-shopping process 
online \114\ and those selecting a dealership based on price. 
Inaccurate price information is likely to cause substantial injury for 
consumers who waste time traveling to the dealership in pursuit of an 
offer that does not exist, and for consumers who never learn that 
unexpected charges have been added to their dense paperwork during the 
hours-long vehicle buying and financing process.
---------------------------------------------------------------------------

    \114\ See generally Fed. Trade Comm'n, The Road Ahead: Selling, 
Financing & Leasing Motor Vehicles (Aug. 2011) (Public Roundtables) 
(Session 2 transcript) (discussing that each month tens of millions 
of consumers seek out vehicle information on edmunds.com, but also 
discussing the reliability (or lack thereof) of such information 
available online), https://www.ftc.gov/system/files/documents/public_events/52654/080211_ftc_sess2.pdf.
---------------------------------------------------------------------------

    Section 463.4(b) would require dealers to provide consumers with 
information about optional add-on charges to help curb deceptive and 
unfair practices. As discussed in Part III.B above, misrepresenting 
that add-ons are required or charging for add-ons without consumers' 
Express, Informed Consent are significant consumer protection concerns. 
Section 463.4(b) would require disclosure on any website, online 
service, or mobile application on which vehicles are offered for sale, 
of a list of all optional add-ons and the price of each add-on (``Add-
on List'').\115\ The Add-on List would have to include all optional 
add-on products for which the dealer charges consumers (and their 
respective prices). If the price of the add-on varies based on the 
specifics of the transaction, the Add-on List would have to include the 
range the typical consumer will pay.\116\ Due to space constraints, 
dealer advertisements presented not online but in another format--such 
as in print, radio, or television--would not be required to include the 
Add-on List. Instead, pursuant to Sec.  463.4(b)(2), those 
advertisements would be required to disclose the website, online 
service, or mobile application where consumers can access a copy of the 
Add-on List.\117\ This proposed provision is consistent with industry 
guidance \118\ and would help ensure that dealers that follow such 
guidance will not be competitively disadvantaged relative to those that 
do not.
---------------------------------------------------------------------------

    \115\ To the extent any add-on charges are required by a 
dealership, and thus not optional, such charges would have to be 
disclosed in the Offering Price, pursuant to proposed Sec.  463.4(a) 
et al.
    \116\ See FTC v. Five Star Auto Club, 97 F. Supp. 2d 502, 528 
(S.D.N.Y. 2000) (``at the very least, it would have been reasonable 
for consumers to have assumed that the promised rewards were 
achieved by the typical Five Star participant''); Universal City 
Nissan, No. 2:16-cv-07239 (C.D. Cal. Sept. 29, 2016) (alleging 
unlawful deception where a dealer's ads list prominent terms not 
generally available to consumers, including where those terms are 
subject to various qualifications or restrictions); Progressive 
Chevrolet Co., No. C-4578 (F.T.C. June 13, 2016) (alleging 
advertised offer was deceptive because the typical consumer would 
not qualify for the offer).
    \117\ Working in tandem, proposed Sec.  463.4(b)(1) and (b)(2) 
would mean that dealers who engage in advertising and charge for 
optional add-ons must have a website, online service, or other 
mobile application by which to disclose an Add-on List.
    \118\ See Nat'l Auto. Dealers Ass'n et al., Voluntary Protection 
Products: A Model Dealership Policy 11 (2019), https://www.nada.org/regulatory-compliance/voluntary-protection-products-model-dealership-policy (stating add-on products and services should be 
presented ``in a standard, simple menu format that, at a minimum, 
prominently discloses: . . . 7. the price of--and monthly payment 
for--each Product . . . .'')
---------------------------------------------------------------------------

    For optional add-on products and services, proposed Sec.  463.4(c) 
would require dealers to disclose that the optional add-on product or 
service is not required and that a consumer can purchase or lease the 
vehicle without the add-on. This disclosure would curb the deceptive 
practice of misleading consumers into thinking an add-on is required 
when it is not.\119\ As with proposed Sec.  463.4(b), this proposed 
provision is consistent with industry

[[Page 42024]]

guidance \120\ and would avoid competitive disadvantage to those 
dealerships that follow such guidance.
---------------------------------------------------------------------------

    \119\ See, e.g., Stipulated Order, FTC v. Universal City Nissan, 
et al., No. 2:16-cv-07239 at Art. III (C.D. Cal. Mar. 22, 2017); 
Stipulated Order, FTC & Illinois v. N. Am. Auto. Servs., Inc., No. 
1:22-cv-0169 at Art. II (N.D. Ill. Mar. 31, 2022).
    \120\ See Nat'l Auto. Dealers Ass'n et al., Voluntary Protection 
Products: A Model Dealership Policy 4 (2019), https://www.nada.org/regulatory-compliance/voluntary-protection-products-model-dealership-policy (stating dealerships should ``prominently display 
to customers a poster stating that [add-on products and services] 
offered by the dealership are optional and are not required to 
purchase or lease a vehicle or obtain warranty coverage, financing, 
financing on particular terms, or any other product or service 
offered by the dealership.'')
---------------------------------------------------------------------------

    Section 463.4(d) would require dealers to disclose the total of 
payments when quoting monthly payment amounts to a prospective buyer or 
lessee. Specifically, Sec.  463.4(d) would prohibit motor vehicle 
dealers from making any representation about a monthly payment for any 
vehicle without disclosing the total amount the consumer will pay to 
purchase or lease the vehicle at that monthly payment amount after 
making all monthly payments; if that total amount assumes consideration 
provided by the consumer (e.g., a cash down payment or a trade-in), 
those amounts must also be disclosed.
    Section 463.4(e) would complement the preceding provision by 
requiring dealers, when they compare different monthly payment options 
with consumers, to inform consumers that a lower monthly payment will 
increase the total amount the consumer will pay, if true. These 
provisions are intended to prohibit dealers from using claims regarding 
monthly payment amounts to falsely imply savings or parity between 
different offers where reduced monthly payments increase the total 
vehicle cost due to an increased payment term, and potentially an 
increased annual percentage rate (``APR'') as well. Additionally, when 
a consumer pays for his or her vehicle over a longer period of time, 
there is an increased likelihood that the consumer will continue to owe 
money even after he is no longer driving the vehicle. This results in 
negative equity when the consumer needs or wants to purchase another 
vehicle, because a vehicle's value tends to decline faster than the 
amount owed.\121\ Longer motor vehicle financing terms also have higher 
rates of default, potentially posing greater risks to both borrowers 
and financing companies.\122\
---------------------------------------------------------------------------

    \121\ Buckle Up, supra note 15, at 7.
    \122\ Consumer Fin. Prot. Bureau, Quarterly Consumer Credit 
Trends: Growth In Longer-Term Auto Loans 7-8 (Nov. 2017), https://files.consumerfinance.gov/f/documents/cfpb_consumer-credit-trends_longer-term-auto-loans_2017Q2.pdf; see also Zhengfeng Guo et 
al., Off. of the Comptroller of the Currency, A Puzzle in the 
Relation Between Risk and Pricing of Long-Term Auto Loans 2, 4-5, 20 
(June 2020), https://www.occ.gov/publications-and-resources/publications/economics/working-papers-banking-perf-reg/pub-econ-working-paper-puzzle-long-term-auto-loans.pdf (finding motor vehicle 
financing with six-plus-year terms have higher default rates than 
shorter-term financing during each year of their lifetimes, after 
controlling for borrower and loan-level risk factors).
---------------------------------------------------------------------------

    Take, for example, a borrower who finances the purchase of a 
$25,000 vehicle with a $5,000 down payment and a 10% APR. With a five-
year (60-month) term, her monthly payment will be $425. If the consumer 
balks at that monthly payment, the dealer could quote her a lower 
monthly payment of $332. If, however, the down payment and APR stay the 
same, that would result in a seven-year (84-month) term. Although the 
second offer might appear to be less costly, it will result in the 
consumer paying $2,394 more in interest over the course of the longer 
financing term. The second offer would also obligate the buyer to make 
payments for two additional years; if she needed to shop for a new 
vehicle after 60 months, she would still owe an outstanding balance of 
$7,195 on the first vehicle.\123\
---------------------------------------------------------------------------

    \123\ The cost disparities resulting from monthly payment 
fixation can be even greater because financing entities tend to 
charge higher interest rates for longer terms. See Nat'l Credit 
Union Admin., Credit Union and Bank Rates 2021 Q1 (Mar. 26, 2021), 
https://www.ncua.gov/analysis/cuso-economic-data/credit-union-bank-rates/credit-union-and-bank-rates-2021-q1 (listing national average 
rates for new motor vehicle and used motor vehicle financing by 
term). In the example above, the alternate deal presented to the 
consumer may be for the same $25,000 purchase price and same $5,000 
down payment, but with a longer repayment term of 84 months and a 
higher 12% APR. With this alternative, the new monthly payment of 
$353 is still considerably lower than the $425 monthly payment first 
offered, but it will in fact result in the consumer paying in $4,161 
additional interest over the course of the extended period, and 
owing a balance of $7,500 to trade in the vehicle on the same 60-
month timeline as the first offer.
---------------------------------------------------------------------------

    As discussed further below, singular focus on monthly payments can 
also make consumers susceptible to unwanted, undisclosed, or even 
fictitious add-on charges and fees, because consumers may not notice 
relatively small add-on charges secreted within a monthly payment 
(e.g., $15). Such hidden charges can cost a consumer more than a 
thousand dollars over the course of an auto financing or lease 
term.\124\
---------------------------------------------------------------------------

    \124\ See Auto Buyer Study, supra note 11, at 14 (``the dealer 
can extend the maturity of the financing to reduce the effect of the 
add-on on the monthly payment, obscuring the total cost of the add-
on''); Auto Buyer Study: Appendix, supra note 66 (Study participant 
457481 at 229, 233 (dealership pitching add-ons at the end of the 
negotiation, and in terms of consumer's monthly price); Study 
participant 437175 at 701 (dealership pitching add-ons in terms of 
monthly price)); see also Liberty Chevrolet, No. 1:20-cv-03945 at ]] 
12-19 (S.D.N.Y. May 21, 2020) (alleging dealership included 
deceptive and unauthorized add-on charges in consumers' 
transactions); Ramey Motors, No. 1:14-cv-29603 at ]] 21-28 (S.D. W. 
Va. Dec. 11, 2014) (alleging dealer emphasized attractive terms such 
as low monthly payments but concealed substantial cash down payments 
or trade-in requirements); Billion Auto, No. 5:14-cv-04118-MWB at ]] 
38-46 (N.D. Iowa Dec. 11, 2014) (alleging dealer touted attractive 
terms such as low monthly payments but concealed significant extra 
costs).
---------------------------------------------------------------------------

    Further, when dealers advertise deceptively low monthly payments 
that amount to a fraction of the total cost of the vehicle, consumers 
may end up owing a large balloon payment in addition to the advertised 
monthly payment amount, either at signing \125\ or after finishing 
their monthly payments,\126\ or may be required to pay a much higher 
monthly payment once the artificially low ``teaser rate'' expires.\127\
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    \125\ See, e.g., Norm Reeves, No. 8:17-cv-01942 at ]] 28-30 
(C.D. Cal. Nov. 3, 2017) (alleging deceptive representations 
regarding monthly payments); Universal City Nissan, No. 2:16-cv-
07329 at ]] 30-33 (C.D. Cal. Sept. 29, 2016) (alleging 
misrepresentations regarding monthly payments).
    \126\ See, e.g., New World Auto Imports, No. C-4437 at ]] 8-11 
(F.T.C. Feb. 20, 2014) (alleging misrepresentation regarding monthly 
finance payments); New World Auto Imports, No. 3:16-cv-02401-K at ]] 
36-38 (N.D. Tex. Aug. 18, 2016) (alleging deceptive representations 
regarding monthly payments); see also Melissa Harper, Comment Letter 
on Public Roundtables: Protecting Consumers in the Sale and Leasing 
of Motor Vehicles, Project No. P104811, Submission No. 558507-00007 
(Apr. 2, 2011), available at https://www.regulations.gov/docket/FTC-2022-0036 (stating consumer paid monthly payments for 4 years, told 
she still owed money on the car when originally told it would be 
paid off in this time period).
    \127\ See, e.g., Complaint, In re Paramount Kia of Hickory, LLC, 
No. C-4450 at ]] 5-6 (F.T.C. Apr. 11, 2014) (alleging 
misrepresentation regarding monthly payment amount); Complaint, In 
re Nissan of South Atlanta, LLC, No. C-4435 at ] 5 (F.T.C. Feb. 28, 
2014) (alleging misrepresentation of monthly payment amount); 
Universal City Nissan, No. 2:16-cv-07329 at ]] 30-34 (C.D. Cal. 
Sept. 29, 2016) (alleging advertised $38 monthly payment only 
applied for the first 6 months; offer in fact required $179.62 per 
month for the remaining 30 months).
---------------------------------------------------------------------------

    The Commission anticipates that the proposed rule's requirement 
that dealers must disclose the total cost of a vehicle when quoting 
monthly payment amounts to a prospective buyer will help prospective 
buyers make more informed purchasing decisions and curb these deceptive 
and unfair practices.
    Similarly, by requiring that dealers disclose that a lower monthly 
payment amount will increase the vehicle's total cost, when true, 
consumers will be able to gauge how much a given financing or lease 
offer will ultimately cost in order to compare different offers. This 
will help to decrease the likelihood that a consumer will be deceived 
about the comparative cost of a financing or lease offer, and help 
prevent dealers from

[[Page 42025]]

including optional add-on products or services without the consumer's 
Express, Informed Consent. These proposed provisions do not conflict 
with ``triggering term'' requirements under other federal rules, 
including Regulation Z (of the Truth in Lending Act) and Regulation M 
(of the Consumer Leasing Act).\128\
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    \128\ See 12 CFR 1026.24(d) (Regulation Z triggering terms 
provision); 12 CFR 213.7 (Regulation M triggering terms provision). 
These rules require that when an advertisement for a financed 
purchase or a lease mention a specific triggering term--for example, 
a monthly payment amount--that those advertisements also disclose 
other specified terms, including the number, amount, and timing of 
payments.
---------------------------------------------------------------------------

    Taken together, provisions 463.4(a) through (e) are intended to 
curb deceptive and unfair conduct related to pricing and add-ons. As 
discussed above, consumers are presented with a high volume of dense 
information during the long and complex motor vehicle buying or leasing 
experience. In some cases, prospective buyers receive conflicting 
information or are not provided key information, or fully informed 
about applicable charges. These practices harm consumers who may incur 
time and expense during the vehicle-shopping process or incur 
unexpected costs when dealers tout artificially low costs and other 
incentives in advertising and during negotiations, only revealing that 
those deals are not available late in the buying process, if at all. 
For example, participants in the FTC's qualitative Auto Buyer Study 
encountered situations where dealers settled on a price with them on 
the sales floor, but later a financing representative revoked the 
agreed upon price, claiming that it could not be honored.\129\
---------------------------------------------------------------------------

    \129\ See Auto Buyer Study, supra note 11, at 11.
---------------------------------------------------------------------------

    Dealer control over the flow and timing of information enables them 
to add charges or change contract terms late in the purchase or lease 
process.\130\ In some instances, after consumers have spent hours 
traveling to the dealership and then on the lot (perhaps after already 
having spent hours comparing prices and features online), dealers 
present a large pile of paperwork and give consumers little time to 
review it. As a result, consumers are unaware that charges have been 
added or promised discounts or benefits have been removed.\131\ In 
other instances, consumers learn about additional charges or changes to 
their terms after they have invested substantial time and energy in the 
buying or leasing process.\132\ Requiring that consumers receive clear 
pricing disclosures early in the process will curb situations where 
consumers face unexpected charges at the end of the vehicle-buying 
process.\133\
---------------------------------------------------------------------------

    \130\ Att'ys General of 31 States & DC, Comment Letter on Public 
Roundtables: Protecting Consumers in the Sale and Leasing of Motor 
Vehicles, Project No. P104811, Submission No. 558507-00112 at 5 
(Apr. 13, 2012), available at https://www.regulations.gov/docket/FTC-2022-0036 (describing the addition of documentary fees that 
``often come as complete surprises to consumers, and are not 
disclosed until well after the dealer and consumer agree on a sales 
price for the vehicle.''); Auto Buyer Study, supra note 11, at 13-
14, (offering add-ons after a vehicle price is negotiated is a form 
of drip pricing, which can result in higher prices to consumers by 
reducing the likelihood consumers will search for alternative 
suppliers).
    \131\ See Liberty Chevrolet, No. 1:20-cv-03945 at ]] 17-18 
(S.D.N.Y. May 21, 2020) (alleging dealer inflated vehicle prices and 
charged consumers double for sales tax or other fees, and often 
consumers did not notice the bait and switch from an earlier price 
document to the final sales price contained in ``a stack of complex, 
highly technical documents presented at the close of a long 
financing process after an already lengthy process of selecting car 
and negotiating over its price.''); Universal City Nissan, No. 2:16-
cv-07329 at ]] 60, 91-93 (C.D. Cal. Sept. 29, 2016) (alleging dealer 
rushed consumers through signing process, and often consumers were 
unaware of add-on products included in the paperwork); see also 
Buckle Up, supra note 15, at 10-11. As part of the FTC's study of 
dozens of motor vehicle buyers who recently purchased a vehicle, 
many consumers reported they were unable to review the paperwork 
consummating the purchase transaction. The consumers reported 
several reasons, including that the long transaction left them 
exhausted, the dealer rushed them through the signing process, and 
they were overwhelmed or thought it would take them a few hours or 
days to read all of the fine print in the paperwork. These factors 
likely contributed to many consumers lacking awareness of critical 
financing terms.
    \132\ See Auto Buyer Study, supra note 11, at 13.
    \133\ See Buckle Up, supra note 15, at 6. Some study 
participants found ``after negotiating what they thought was an 
agreed-upon price for a vehicle with sales personnel, they faced 
negotiating again during the dealer's financing process, which they 
found frustrating and time-consuming.'' In addition, ``introduction 
of add-ons during financing discussions caused several participants' 
total sale price to balloon from the cash price.'' Accordingly, the 
staff report recommends ``discussing the `out-the-door' price of the 
vehicle (the total price, before financing, including taxes and 
fees) before discussing financing could help avoid confusion.''
---------------------------------------------------------------------------

E. Sec.  463.5: Dealer Charges for Add-Ons and Other Items

    Section 463.5 of the proposed rule would prohibit charging for add-
on products that provide no benefit to the consumer and would prohibit 
charging consumers without Express, Informed Consent. Add-on products 
and services are commonly offered by dealers in conjunction with 
vehicle financing or leasing, and these products and services make up a 
significant share of dealers' profits.\134\ In some cases, dealers 
appear to charge for add-on products or services under circumstances in 
which the consumer could never benefit from that product or 
service.\135\ However, charging for non-beneficial products is 
inconsistent with industry guidance,\136\

[[Page 42026]]

and dealerships that profit from such sales put honest dealerships at a 
competitive disadvantage.
---------------------------------------------------------------------------

    \134\ See Adrienne Roberts, Add-On Services Emerge as Car 
Dealers' Profit Generator, Wall Street Journal, Apr. 7, 2019, 
https://www.wsj.com/articles/add-on-services-emerge-as-car-dealers-profit-generator-11554634800; Edmunds, Where Does the Car Dealer 
Make Money, June 13, 2019, https://www.edmunds.com/car-buying/where-does-the-car-dealer-make-money.html. As of August 2021, 
approximately 94% of new vehicles and 86% of used vehicle sales 
involved dealerships' finance and insurance office, which offers 
products and services such as GAP insurance, alarm systems and 
extended warranties. Nat'l Auto. Dealers Ass'n, Average Dealership 
Profile at 1 (Aug. 2021), https://www.nada.org/media/4129/download?inline.
    \135\ See, e.g., Individual consumer complaint, filed Mar. 27, 
2021 (``I bought this warranty February 2nd with insistence from the 
dealer. They advertise false coverage, most of the things they 
supposedly covered come with limitations and exclusions in which you 
are ultimately not covered at all. The[re a]re is so many exclusions 
it's ridiculous, there is a total of A-Z of letters with each one 
stating various parts that are not covered, I will only mention one 
since there is an absurd amount. Letter B states, `repair or 
replacement of any covered component when it has been determined 
that the condition existed prior to purchase of this agreement.' 
Lovely, so if you bought your vehicle used, you are not covered. 
Their contract is misleading, you're promised coverage but then they 
find loopholes and you are left with no coverage.''); Individual 
consumer complaint, filed Aug. 29, 2019 (``Federal Trade Commission, 
I believe I have been treated unfairly as a consumer in the state of 
Iowa . . . . I was aggressively sold GAP insurance while purchasing 
a vehicle . . . . The [ ] dealership made a lot of promises when 
selling the GAP insurance which I have documentation for, but then 
failed to honor those promises once I needed the GAP insurance after 
a no fault deer collision . . . The [ ] dealership aggressively sold 
me GAP insurance as `an add-on car insurance coverage that would 
cover the `gap' between the amount owed on the car and the car's 
actual cash value in the event of an accident or collision. I was 
told my primary insurance company . . . would only cover the cash 
value, I would pay my $500 deductible, and [the dealership]'s GAP 
would cover the remaining amount owed to pay the lien holder down to 
a zero balance . . . . Instead of getting the peace of mind they 
sold by adding GAP insurance, [the dealership] left me to cover the 
remaining balance of $998.62 after I pay the $500 insurance 
deductible.''); Individual consumer complaint, filed June 23, 2021 
(``The dealership also sold an aftermarket warranty. 24 hours after 
taking delivery, I had the vehicle inspected and was informed of 
$6,000 in repairs . . . . Once the warranty company checked the 
vehicle, they informed me that the warranty was void due to intake 
and tubing modifications. Therefor[e], the dealership sold a 
warranty for a vehicle that could not be warrantied by the 
company''); Individual consumer complaint, filed May 12, 2021 (``I 
purchased a 2011 Chevy Malibu from a dealer and with the purchase, 
also purchased a 5 year, 100,000 mile power train warranty. I have 
had the car for 39 months and have driven about 35,000 miles since 
purchase. The car has had a couple issues and the warranty has never 
covered ANY repair costs at any time. 2 weeks ago, an item in the 
engine broke and now is not functioning at all. The mechanic reached 
out to [the extended warranty provider] and was told nothing will be 
covered. I called and asked and got told that covered items would be 
covered along with labor. We continue to get the run around with me 
being told one thing and the mechanic another. This warranty has 
been nothing more than a waste of time, money, and is now in my mind 
a scam to get money from unsuspecting customers.'').
    \136\ See Nat'l Auto. Dealers Ass'n et al., Voluntary Protection 
Products: A Model Dealership Policy 5 (2019), https://www.nada.org/regulatory-compliance/voluntary-protection-products-model-dealership-policy (explaining that when determining which voluntary 
protection products to offer to customers, ``the dealership should 
have confidence in the value that the product offers to customers'', 
including that it should ``understand whether its coverage is 
already provided by another product being purchased by the 
customer,'' and stating ``[i]t is essential customers have a clearly 
defined path to receiving such benefits.'').
---------------------------------------------------------------------------

    Proposed Sec.  463.5(a) would prohibit this practice. A dealer 
would be in violation of this provision if, for example, the dealer 
offered and charged for products such as ``rustproofing'' that did not 
actually prevent rust, offered purported theft-prevention or theft-
recovery services without proof that the services actually prevented 
theft or recovered stolen items, or charged for ``nitrogen-filled 
tires'' that in fact contained no more nitrogen than naturally exists 
in the air. A dealer would also violate this provision if the dealer 
sold GAP insurance to buyers whose financing balance was so low that 
ordinary insurance would be adequate to cover any loss.\137\ Further, 
the proposed restriction would prohibit the sale of GAP insurance when 
hidden restrictions would exclude a vehicle buyer from coverage (e.g., 
where the consumer's vehicle is among a list of vehicles excluded from 
coverage, or the consumer's neighborhood is excluded from coverage). 
Similarly, the proposed rule would prohibit other optional add-on 
products or services that offer consumers no benefit, including 
extended warranties that merely duplicate coverage already provided on 
the vehicle.\138\
---------------------------------------------------------------------------

    \137\ GAP products cover the difference, or ``gap,'' between the 
amount the consumer owes on the motor vehicle financing and the 
amount received from the vehicle insurer in the event of a total 
loss. A gap is more likely when the loan-to-value (LTV) ratio is 
high, since the outstanding balance owed by the consumer at the time 
of a total loss is more likely to exceed the insurance proceeds; 
conversely, with a low LTV, the insurance payout for a totaled 
vehicle will likely cover the consumers' outstanding debt, rendering 
GAP unnecessary. See Consumer Fin. Prot. Bureau, Supervisory 
Highlights, Issue 19--Summer 2019 at 4, https://files.consumerfinance.gov/f/documents/cfpb_supervisory-highlights_issue-19_092019.pdf (describing as unlawful the sale of 
``a GAP product to consumers whose low LTV meant that they would not 
benefit from the product'').
    \138\ The Road Ahead: Selling, Financing & Leasing Motor 
Vehicles, a Roundtable, Panel 2: Misrepresentations and Other 
Consumer Protection Issues in Motor Vehicle Leasing, comment of 
panelist Tom Domonoske, transcript at 19-21 (Nov. 17, 2011), https://www.ftc.gov/sites/default/files/documents/public_events/road-ahead-3rd-roundtable-november-17th/dc_sess2.pdf; Dale Irwin, Slough 
Connealy Irwin & Madden LLC, Comment Letter on Public Roundtables: 
Protecting Consumers in the Sale and Leasing of Motor Vehicles, 
Project No. P104811, Submission No. 558507-00060 (Dec. 29, 2011), 
available at https://www.regulations.gov/document/FTC-2011-0027-0001 
(``fraudulent sale of duplicative extended warranty coverage on new 
cars''); FSP and Assocs., LLC, Comment Letter on Public Roundtables: 
Protecting Consumers in the Sale and Leasing of Motor Vehicles, 
Project No. P104811, Submission No. 558507-00094 (Mar. 19, 2012), 
available at https://www.regulations.gov/docket/FTC-2022-0036 (one 
of ``the most insidious elements of car dealer financing is . . . 
insurance [add-ons] they load into every contract,'' which in ``most 
cases the purchaser has no idea it is there'' and ``adds to the 
overall interest and vehicle cost and usually provides no benefit to 
the purchaser''); Consent Order, Consumer Fin. Prot. Bureau v. Wells 
Fargo Bank, N.A., No. 2018-BCFP-0001 at ]] 27-39 (Apr. 20, 2018) 
(finding force-placing duplicative or unnecessary collateral-
protection insurance on hundreds of thousands of borrowers' 
vehicles); StewartFin. Co. Holdings, No. 103CV-2648 at ]] 28, 45-48 
(N.D. Ga. Sept. 4, 2003) (``On numerous occasions, Stewart Finance 
has sold Car Club to borrowers who do not own cars or do not have 
driver's licenses and thus, would not benefit from the product''); 
cf. Nat'l Payment Network, No. C-4521 at ]] 4-14 (F.T.C. May 4, 
2015) (alleging provider of third-party vehicle repayment service 
failed to disclose fees associated with financing program often 
exceed consumers' savings from using the program); Matt Blatt, No. 
C-4532 at ]] 4-13 (F.T.C. May 4, 2015) (alleging dealership failed 
to disclose fees associated with third-party vehicle repayment 
service often exceeded consumers' savings from using the program).
---------------------------------------------------------------------------

    Consumers do not agree to purchase additional products from which 
they could not benefit unless they are led to believe, directly or by 
omission, that these products would be beneficial. Rather than 
requiring an additional, confusing disclosure--e.g., that the dealer is 
charging extra for an item that will not provide the consumer any 
benefit--this provision would prevent dealers from being able to 
extract additional charges from consumers based on deception. 
Accordingly, and similar to provisions enacted by a number of 
states,\139\ Sec.  463.5(a) of the proposed rule would prohibit motor 
vehicle dealers from marketing or selling an add-on product or service 
if the consumer would not benefit from such an add-on product or 
service.
---------------------------------------------------------------------------

    \139\ See, e.g., Ind. Code sec. 24-4.5-3-202(e)(ix) (prohibiting 
sale of GAP when LTV is less than 80); 4 Colo. Code Regs. sec. 902-
1:8(g) (prohibiting sale of GAP when the consumer, the credit terms, 
or the purchased vehicle do not qualify for, or conflict with, 
coverage); S.C. Code sec. 37-30-120(I)(1) (prohibiting sale of GAP 
unless seller reasonably believes the borrower will be eligible for 
a benefit).
---------------------------------------------------------------------------

    Section 463.5(b) of the proposed rule would curb the practice of 
charging for optional add-ons without the consumer's consent or 
misrepresenting that an optional add-on is instead a required purchase. 
It would also prohibit dealers from changing pricing information in the 
financing office. Specifically, proposed Sec.  463.5(b)(1) states that 
dealers may not charge for optional add-ons unless they disclose up 
front the cash price at which a consumer may purchase the vehicle 
without additional add-ons. The proposed rule would require that 
dealers disclose, and offer to close the transaction for, the Cash 
Price without Optional Add-ons, separately itemizing the Offering 
Price, any discounts, rebates, or trade-in valuation, and required 
government charges. If the prospective buyer declines to purchase the 
vehicle at that price, the dealer must obtain confirmation in writing, 
with the date and time recorded, signed by the consumer and a manager 
of the dealership. The dealer must retain this signed form to document 
that the dealer has provided the required Offering Price disclosure to 
consumers before including optional add-ons in a sales transaction. The 
Cash Price without Optional Add-ons disclosure and declination must be 
limited to the information required by this Sec.  , and cannot be 
presented together with any other written materials.
    Proposed Sec.  463.5(b)(2) would require similar disclosures in the 
context of financed transactions: dealers would not be permitted to 
charge for optional add-ons without disclosing, and offering to 
consummate the transaction for, the Cash Price without Optional Add-ons 
plus the finance charge, factoring in any cash down payment or trade-in 
valuation (and separately itemizing the components of the offer).\140\ 
If the consumer declines to finance the transaction for that amount, 
the dealer, as above, must obtain confirmation of that declination in 
writing. The disclosure and declination must be limited to the 
information required by this section, and cannot be presented with any 
other written materials
---------------------------------------------------------------------------

    \140\ Consistent with TILA, charges included entirely in the 
finance charge are not ``optional Add-ons.''
---------------------------------------------------------------------------

    Proposed Sec.  463.5(b)(3) would require a dealer, before charging 
for any optional add-on, to disclose the cost of the transaction 
without any optional add-ons (whether the transaction is financed or 
not), and also disclose the charges for the optional add-ons selected 
by the consumer, separately itemized.
    Section 463.5(c) of the proposed rule would prohibit motor vehicle 
dealers, in connection with the sale, financing, and leasing of 
vehicles, from charging consumers for any item without their Express, 
Informed Consent. ``Express, Informed Consent'' is defined as an 
affirmative act communicating unambiguous assent to be charged, made 
after receiving and in close proximity to a Clear and Conspicuous 
disclosure, in writing, and also orally

[[Page 42027]]

for in-person transactions, of the following: (1) what the charge is 
for; and (2) the amount of the charge, including, if the charge is for 
a product or service, all fees and costs to be charged to the consumer 
over the period of repayment with and without the product or 
service.\141\ The definition also provides nonexclusive examples of 
what is not considered Express, Informed Consent. First, documents with 
a mere signature or initials, or a form presented to a consumer with 
preprinted checkboxes, would not constitute Express, Informed Consent. 
Similarly, agreement obtained through any practice, such as a user 
interface or document, designed or manipulated with the substantial 
effect of subverting or impairing user autonomy, decision-making, or 
choice, would not constitute Express, Informed Consent.
---------------------------------------------------------------------------

    \141\ See, e.g., Stipulated Order, FTC v. Liberty Chevrolet, 
Inc., No. 1:20-cv-03945 (S.D.N.Y. May 22, 2020) (defining Express, 
Informed Consent in the same manner).
---------------------------------------------------------------------------

    As discussed above, the length and complexity of motor vehicle 
transactions has created an environment ripe for deceptive or unfair 
conduct. Consumer complaints suggest some dealers have added thousands 
of dollars in unauthorized charges, including for add-ons consumers had 
already rejected.\142\ These issues are exacerbated when pre-printed 
consumer contracts automatically include charges for optional add-ons, 
when consumers are rushed through stacks of paperwork, or when they are 
asked to sign blank documents.\143\
---------------------------------------------------------------------------

    \142\ See generally Buckle Up, supra note 15. As part of the 
FTC's qualitative study of dozens of consumers who had recently 
purchased a vehicle, nearly all complained about the time spent at 
the dealership and the hefty paperwork needed to complete the 
transaction. Several consumers learned during their post-purchase 
interviews that they had bought add-ons that they did not know about 
(or that they had declined), others thought they got add-ons for 
free but in fact paid for them, and some purchased GAP insurance 
only because the dealer said or implied that it was mandatory.
    \143\ Universal City Nissan, No. 2:16-cv-07329 at ]] 58, 60 
(C.D. Cal. Sept. 29, 2016) (alleging preprinted contracts and 
rushing consumers to sign); Liberty Chevrolet, No. 1:20-cv-03945 at 
]] 17-19 (S.D.N.Y. May 21, 2020) (alleging charging consumers for 
taxes twice by rushing consumers to sign); see also Individual 
consumer complaint, filed May 18, 2021 (``They signed me up for a 
service plan even though I never requested one and charged an extra 
$1000 to my auto loan without my consent. They stated I signed the 
paperwork so theres nothing I could do that its my fault for not 
being more careful and they refused to reimburse me even though I 
never knew of or used the service.'').
---------------------------------------------------------------------------

    This provision would help protect consumers from unfair or 
deceptive charges buried within lengthy contracts or stacks of 
paperwork.\144\
---------------------------------------------------------------------------

    \144\ The Commission has observed that some businesses use 
``dark patterns'' to steer consumers to take particular action, 
whether it is making claims in a particular way to induce them to 
click on a link on a website or to agree to a transaction, even if 
it includes charges for unwanted items. See, e.g., Bringing Dark 
Patterns to Light: an FTC Workshop, Fed. Trade Comm'n (Apr. 29, 
2021) (Public Event), https://www.ftc.gov/news-events/events-calendar/bringing-dark-patterns-light-ftc-workshop; see also supra 
note 113. And the Commission has seen via extrinsic evidence 
(including consumer complaints and surveys) that large numbers of 
consumers experience unexpected and unauthorized charges, 
notwithstanding disclosures, contract disclaimers, and signature 
lines. Summary Judgment Order, FTC v. Amazon.com, No. 2:14-cv-01038-
JCC, at 17-20 (W.D. Wash. 2016); N. Am. Auto. Servs., No. 1:22-cv-
0169 at ] 27 (N.D. Ill. Mar. 31, 2022) (alleging that, according to 
a survey of dealership customers, at least 83% of them were charged 
for add-on products without authorization or as a result of 
deception).
---------------------------------------------------------------------------

    In sum, the complexities and duration of a typical motor vehicle 
transaction, and the myriad problems observed in the industry, call for 
a means to obtain and record Express, Informed Consent to charges 
instead of simply collecting signatures or initials within dense 
paperwork. Other statutes and rules enforced by the FTC likewise 
include Express, Informed Consent requirements for consumer 
purchases,\145\ and similar provisions appear in Commission orders 
resolving charges that motor vehicle dealers or other sellers have 
levied unauthorized charges on consumers.\146\
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    \145\ 15 U.S.C. 8402(a)(2), 8403(2) (Restore Online Shoppers' 
Confidence Act); 16 CFR 310.4(a)(7) (Telemarketing Sales Rule).
    \146\ Liberty Chevrolet, No. 1:20-cv-03945 at Art. II (S.D.N.Y. 
May 27, 2020); Stipulated Order, FTC v. Consumer Portfolio Servs., 
No. 14-cv-00819 at Art. III (C.D. Cal. June 11, 2014). Based on 
years of experience in a variety of contexts (including for dealings 
not nearly as complex as motor vehicle transactions), the Commission 
has often required such Express, Informed Consent provisions. See, 
e.g., Stipulated Order, FTC v. Yellowstone Capital LLC, No. 1:20-cv-
06023-LAK at Art. III (S.D.N.Y. May 4, 2021); Stipulated Order, FTC 
v. Prog. Leasing, No. 1:20-cv-1688-JPB at Art. IV (N.D. Ga. Apr. 22, 
2020); Decision and Order, FTC v. Bionatrol Health, LLC, No. C-4733 
at Art. VI (F.T.C. Mar. 5, 2021); Stipulated Order, FTC v. Bunzai 
Media Grp., Inc., No. CV 15-4527-GW(PLAx) at Art. I.E (C.D. Cal. 
June 27, 2018); Stipulated Order, FTC v. T-Mobile USA, Inc., No. 
2:14-cv-00967-JLR at Art. I (W.D. Wash. Dec. 19, 2014); Stipulated 
Order, FTC v. AT&T Mobility, LLC, No. 1:14-cv-03227-HLM at Art. I 
(N.D. Ga. Oct. 8, 2014); Decision and Order, In re Google, Inc., No. 
C-4499 at Art. I (F.T.C. Dec. 2, 2014).
---------------------------------------------------------------------------

F. Sec.  463.6: Recordkeeping

    The proposed rule also includes various recordkeeping requirements 
to help ensure compliance with the Rule's disclosure requirements. 
Section 463.6 of the proposed rule describes the types of records motor 
vehicle dealers must keep, and the time period for retention. 
Specifically, this provision requires motor vehicle dealers subject to 
the Rule to keep for a period of 24 months: all materially different 
advertisements, sales scripts, training materials, and marketing 
materials regarding vehicle price, financing, or leasing terms; all 
materially different copies of lists of add-on products and services; 
consumer transaction documents such as purchase orders, financing and 
leasing agreements (and related correspondence, including declination 
documents as required by the preceding section); records to show 
compliance with monthly payment disclosure and add-on sales 
requirements; written consumer complaints and consumer inquiries 
regarding add-ons or individual vehicles; and other records needed to 
demonstrate compliance with this Rule. These recordkeeping provisions 
are necessary to ensure dealers make required disclosures under the 
Rule. They will also assist the Commission in assessing dealers' 
compliance with the Rule and help to ensure its effectiveness.\147\ 
These recordkeeping obligations are consistent with and similar to 
requirements included in similar Commission disclosure rules, as 
tailored to individual industries and markets.\148\
---------------------------------------------------------------------------

    \147\ Norm Reeves, No. 8:17-cv-01942 at ]] 42-45 (C.D. Cal. Nov. 
3, 2017) (alleging dealer failed to keep records of previous 
advertisements needed to demonstrate compliance with prior order); 
New World Auto Imports, No. 3:16-cv-22401 at ]] 32-35 (N.D. Tex. 
Aug. 18, 2016) (alleging dealer failed to keep records of previous 
advertisements needed to demonstrate compliance with prior order).
    \148\ 16 CFR 310.5 (Telemarketing Sales Rule); 16 CFR 437.7 
(Business Opportunity Rule); 16 CFR 453.6 (Funeral Industry 
Practices Rule); 16 CFR 301.41 (Fur Products Labeling).
---------------------------------------------------------------------------

G. Sec.  463.7: Waiver Not Permitted

    Section 463.7 of the proposed rule provides that ``[a]ny attempt by 
any person to obtain a waiver from any consumer of any protection 
provided by or any right of the consumer under this part constitutes a 
violation of this part.'' This provision would prevent attempts to 
circumvent provisions of the proposed rule, for example during the 
paperwork review process with consumers. This provision is modeled on a 
similar provision in the Mortgage Assistance Relief Services Rule.\149\
---------------------------------------------------------------------------

    \149\ See 12 CFR 1015.8.
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V. Request for Comment

    You can file a comment online or on paper. For the Commission to 
consider your comment, we must receive it on or before September 12, 
2022. Write ``Motor Vehicle Dealers Trade Regulation Rule--Rulemaking, 
No. P204800'' on your comment. Your comment--including your name and 
your state--will be placed on the public record of this proceeding, 
including, to the extent practicable, on the https://www.regulations.gov website.

[[Page 42028]]

    Because of the public health emergency in response to the COVID-19 
outbreak and the agency's heightened security screening, postal mail 
addressed to the Commission will be subject to delay. We strongly 
encourage you to submit your comments online through the https://www.regulations.gov website. To ensure the Commission considers your 
online comment, please follow the instructions on the web-based form.
    If you file your comment on paper, write ``Motor Vehicle Dealers 
Trade Regulation Rule--Rulemaking, Matter No. P204800'' on your comment 
and on the envelope, and mail your comment to the following address: 
Federal Trade Commission, Office of the Secretary, 600 Pennsylvania 
Avenue NW, Suite CC-5610 (Annex C), Washington, DC 20580.
    Because your comment will be placed on the public record, you are 
solely responsible for making sure your comment does not include any 
sensitive or confidential information. In particular, your comment 
should not include any sensitive personal information, such as your or 
anyone else's Social Security number; date of birth; driver's license 
number or other state identification number, or foreign country 
equivalent; passport number; financial account number; or credit or 
debit card number. You are also solely responsible for making sure your 
comment does not include any sensitive health information, such as 
medical records or other individually identifiable health information. 
In addition, your comment should not include any ``trade secret or any 
commercial or financial information which . . . is privileged or 
confidential''--as provided by Section 6(f) of the FTC Act, 15 U.S.C. 
46(f), and FTC Rule 4.10(a)(2), 16 CFR 4.10(a)(2) --including in 
particular competitively sensitive information such as costs, sales 
statistics, inventories, formulas, patterns, devices, manufacturing 
processes, or customer names.
    Comments containing material for which confidential treatment is 
requested must be filed in paper form, must be clearly labeled 
``Confidential,'' and must comply with FTC Rule 4.9(c). In particular, 
the written request for confidential treatment that accompanies the 
comment must include the factual and legal basis for the request and 
must identify the specific portions of the comment to be withheld from 
the public record. See FTC Rule 4.9(c). Your comment will be kept 
confidential only if the General Counsel grants your request in 
accordance with the law and the public interest. Once your comment has 
been posted publicly at www.regulations.gov--as legally required by FTC 
Rule 4.9(b) --we cannot redact or remove your comment from the FTC 
website, unless you submit a confidentiality request that meets the 
requirements for such treatment under FTC Rule 4.9(c), and the General 
Counsel grants that request.
    Visit the FTC website to read this document and the news release 
describing it. The FTC Act and other laws the Commission administers 
permit the collection of public comments to consider and use in this 
proceeding as appropriate. The Commission will consider all timely and 
responsive public comments it receives on or before September 12, 2022. 
For information on the Commission's privacy policy, including routine 
uses permitted by the Privacy Act, see https://www.ftc.gov/site-information/privacy-policy.

VI. Communications by Outside Parties to the Commissioners or Their 
Advisors

    Written communications and summaries or transcripts of oral 
communications respecting the merits of this proceeding, from any 
outside party to any Commissioner or Commissioner's advisor, will be 
placed on the public record. See 16 CFR 1.26(b)(5).

VII. Questions for Comment

    The Commission seeks comments on various aspects of the proposed 
rule. Without limiting the scope of issues it seeks comment on, the 
Commission is particularly interested in receiving comments on the 
questions that follow. Responses to these questions should be itemized 
according to the numbered questions in this document. In responding to 
these questions, include detailed, factual supporting information 
whenever possible.

General Questions for Comment

    When responding to any of the following general questions, please 
specify the portion(s) of the proposal to which your comment relates.
    1. Does the proposed rule further the Commission's goal of 
protecting consumers from unfair or deceptive acts or practices in the 
motor vehicle marketplace? Why or why not?
    2. Are there any unfair or deceptive acts or practices not 
addressed by the proposed rule that should be? For example, should 
there be additional provisions pertaining to leasing or provisions 
pertaining to interest rates or other financing terms?
    3. Are there any additional practices that occur largely or 
exclusively at certain types of dealerships that any final Rule should 
address? For example, should there be additional provisions pertaining 
to collection or repossession practices employed by ``buy here, pay 
here'' dealerships, including the use of electronic disabling devices 
(sometimes called ``starter interrupt'' or ``kill switches'')?
    4. Portions of the proposed rule contemplate additional disclosures 
in an already lengthy, confusing and disclosure-heavy but low-
comprehension transaction. Would any of the additional proposed 
disclosures do more harm than good? If so, is there another measure 
that should be used to address the consumer protection concerns 
described herein?
    5. Should the Commission provide more detailed requirements 
regarding the content or form of any of the proposed disclosures?
    6. What economic burdens would be imposed on dealers if the Rule 
proposals were adopted? Are there changes that could be made to lessen 
any such burdens without significantly reducing the benefits to 
consumers?
    7. Does the proposed rule adequately address sales and leasing 
practices that take place partially or completely online? If not, 
should there be different or fewer or additional requirements for 
online sales and leasing?
    8. Should any final Rule include additional provisions to address 
electronic disclosures or recordkeeping? Why or why not? If yes, in 
what manner(s)?
    9. Should any final Rule address disclosures in other languages? 
Why or why not? If yes, in what manner(s)?
Sec.  463.2: Definitions
    10. Are the proposed definitions clear? Should any changes be made 
to any definitions? Should the scope of any of the proposed definitions 
be expanded or narrowed, and if so, why?
    11. Are additional definitions needed?
Sec.  463.3: Prohibited Misrepresentations
    Proposed Sec.  463.3 would prohibit dealers from making specified 
misrepresentations.
    12. Are the proposed prohibitions on misrepresentations in this 
section clear, meaningful, and appropriate? Should the scope of any of 
the proposed prohibitions be expanded or narrowed, and if so, how and 
why?
    13. Would any of the proposed prohibitions inadvertently discourage 
truthful advertising to the detriment of consumers? For example, would 
prohibitions against misrepresenting the cost of a purchase make it 
less likely dealers would include truthful pricing

[[Page 42029]]

claims in their ads? If so, please provide suggestions on how to 
address these issues.
    14. Are there any other practices by dealers relating to vehicle 
sales, financing, or leasing that are particularly harmful to military 
servicemembers? For example, are there particular unfair or deceptive 
acts or practices engaged in by dealerships in the proximity of, or 
within, military installations?
    15. Proposed Sec.  463.3(e) would prohibit dealers from 
misrepresenting the availability of vehicles at an advertised price. 
Are there situations in which dealers misrepresent the availability of 
vehicles without reference to price (e.g., the total number of vehicles 
of a certain make, model, and year the dealer has available)? If so, 
should the Commission amend the proposal in Sec.  463.3(e) to directly 
address such misrepresentations? Why or why not?
    16. Proposed Sec.  s 463.3(h) and (i) would prohibit dealers from 
misrepresenting when the transaction is final or binding on all parties 
and from making misrepresentations about keeping cash down payments or 
trade-in vehicles, charging fees, or initiating legal process or any 
action if a transaction is not finalized or if the consumer does not 
wish to engage in a transaction. As indicated in this document, these 
proposed provisions are intended to curb problems with the spot 
delivery of vehicles while the financing for the vehicle remains 
contingent--problems sometimes referred to as ``yo-yo financing.'' 
Should the Commission consider alternative approaches to address such 
problems, such as requiring retail installment sales contracts to 
include a clause prohibiting financing-contingent sales, prohibiting 
the dealer from transferring title to a trade-in vehicle or performing 
any repairs or reconditioning before a sale is final or requiring 
dealers to return trade-in, deposit, and fees, if financing is not 
approved? What would be the effect of such a requirement, and what 
costs and benefits would it entail? Are there data regarding the 
feasibility of finalizing vehicle financing at or before the time the 
retail installment sales contract is signed?
    17. Proposed Sec.  463.3(j) would prohibit misrepresentations 
regarding whether or when a dealer will pay off some or all of the 
financing or lease on a consumer's trade-in vehicle. Should there be 
additional protections here--for example, should there be a requirement 
that dealers pay off outstanding financing or liens on a trade-in 
vehicle within a specified amount of time, or before selling the trade-
in vehicle?
    18. Are there any other common misrepresentations in the motor 
vehicle marketplace that are not adequately addressed by the proposed 
rule? If so, please identify them and how they should be addressed in 
any final Rule. Please also identify the potential costs and benefits 
associated with the approach you propose.
Sec.  463.4: Disclosure Requirements
    Proposed Sec.  463.4 would require dealers to make specified 
disclosures.
    19. Are the disclosures that would be required by this section 
clear, meaningful, and appropriate? Should the scope of any of the 
proposed disclosures be expanded or narrowed, and if so, how and why?
    20. What would be the economic impact, and the costs and benefits, 
of these disclosure requirements?
    21. Should this section include additional disclosure requirements? 
Given the length and complexity of the transaction, would additional 
disclosures make the consumer experience better or worse? Why or why 
not? If so, what are the costs and benefits associated with these 
additional disclosures?
    22. Is the timing of disclosures contemplated by this section 
appropriate and sufficient to provide consumers with useful information 
regarding the purchase or lease of a motor vehicle?
    23. Would any of the required disclosures inadvertently discourage 
truthful advertising to the detriment of consumers? For example, to the 
extent the proposed rule would require that certain disclosures (e.g., 
Offering Price) must accompany other specific information, will dealers 
cease providing that other information altogether? If so, please 
provide suggestions on how to address these issues.
    24. Are there circumstances in which dealers should be required to 
make disclosures and contracts available in languages other than 
English? For instance, should dealers be required to provide 
disclosures and contracts in any language they use for advertising, or 
in any language they use to conduct sales, financing, or lease 
transactions? What would be the effect of such a requirement, and what 
costs and benefits would it entail? Are there other steps the 
Commission should consider taking to protect consumers from 
misrepresentations in dealer advertisements when the sale, lease, or 
financing transaction is conducted in a different language from the one 
used in advertising?
    25. Are the proposed disclosures sufficient to provide consumers 
with clear, meaningful and appropriate information about the financing 
terms of the transaction? Are there other steps the Commission should 
consider taking to protect consumers from being misled regarding their 
financing terms and to ensure that consumers understand their financing 
options?
    26. Proposed Sec.  463.4(a) would require dealers to disclose the 
Offering Price in certain advertisements.
    a. Do dealers already calculate a figure equivalent to the Offering 
Price for every vehicle in their inventory? If so, how is this 
calculated?
    b. In particular, the Commission is contemplating whether it is 
necessary to prohibit advertising any price aside from the Offering 
Price to address concerns with unfairness and deception, including 
those described in this Document. Or, alternatively, should dealers be 
permitted to state in advertisements the Offering Price along with 
other offers that may be of limited applicability (provided the nature 
of the limited applicability is clearly disclosed)? c. Would the 
mandatory disclosure of Offering Price where required ``crowd out'' 
other information in advertising formats where dealers pay for time or 
space?
    27. Proposed Sec.  463.4(a) would also require a dealer to disclose 
the Offering Price in the first response to any query about any 
specific vehicle.
    a. Is it appropriate to limit this requirement to only the dealer's 
first response about the specific vehicle? Or, should the Commission 
require dealers to include the Offering Price in additional 
communications to potential buyers?
    b. What other measures could be taken so consumers know the true 
Offering Price of a vehicle earlier in their decision-making process, 
including before expending resources to visit the dealership?
    28. Proposed Sec.  463.4(b) would require dealers to disclose an 
Add-on List in certain circumstances.
    a. How many add-ons do dealers typically offer, and how many of 
those are sold regularly? Would this disclosure require such a lengthy 
list of add-on products and services that the list would be too long to 
be meaningful to consumers? If so, are there changes that could be made 
to this proposed requirement to reduce the amount of information 
disclosed while preserving the benefits to consumers? For example, 
would limiting this requirement to add-ons that are proposed by the 
dealer to

[[Page 42030]]

a prospective buyer, as opposed to raised by the consumer, adequately 
address the harms that occur to consumers in the context of these 
transactions? Or, should the Add-on List be limited to a certain number 
(e.g., 15) of add-on products and services most frequently sold by the 
dealer in the previous quarter?
    b. How common is it for the price of a given add-on product or 
service to vary for different vehicles and different transactions, and 
on what basis would the price vary? Would it be necessary for dealers 
to provide disclosures specific to an individual consumer, or could 
this proposed requirement be satisfied with a pre-formatted disclosure 
that could be provided to all potential buyers or lessees? If prices 
vary greatly, would disclosing the price range provide meaningful 
information to consumers?
    c. The proposed rule would allow certain advertisements (i.e., 
those not presented on a website, online service, or mobile 
application) to disclose the website, online service, or mobile 
application where the consumer can view the Add-on List, rather than 
disclosing the Add-on List itself within the advertisement. Should the 
Commission take the same or similar approach with advertisements 
presented via other forms of media? Why or why not?
    d. The proposed rule would require dealers that run certain types 
of advertisements and charge for optional add-ons to maintain a 
website, online service, or mobile application at which an Add-on List 
may be found. Do all or most such dealers already operate a website, 
online service, or mobile application that could display the Add-on 
List?
    29. Proposed Sec.  463.4(d) would require a dealer to disclose the 
total amount a consumer must pay to purchase or lease a vehicle when 
the dealer makes representations about monthly payments for a vehicle 
purchase. Can dealers calculate accurate monthly payment information 
for a consumer without calculating the total amount? If not, is there 
any value in a consumer learning monthly payment information before the 
total amount is calculated? If so, how can the proposal be adjusted to 
allow for such information without obscuring necessary information 
about the total amount required to purchase a vehicle?
    30. Proposed Sec.  463.4(e) would require dealers to disclose that 
a lower monthly payment will increase the total amount, if lowering 
monthly payments will do so. This provision could require this 
disclosure multiple times in the same transaction, for example, when a 
dealer's financing office is discussing a range of different monthly 
payments with the consumer. Would requiring multiple disclosures result 
in the disclosure losing effectiveness? Would limiting the disclosure, 
for example, to the first time the disclosure is triggered have 
benefits, or would this reduce the effectiveness of the disclosure by 
requiring it at a time that is not as meaningful to consumers?
Sec.  463.5: Dealer Charges for Add-Ons and Other Items
    Proposed Sec.  463.5(a) would prohibit dealers from marketing or 
selling an add-on product or service to a consumer who would not 
benefit from the add-on product or service in connection with the sale 
or financing of a vehicle.
    31. Are the proposed prohibitions in this section clear, 
meaningful, and appropriate? Should the scope of any of the proposed 
prohibitions be expanded or narrowed, and if so, how and why?
    32. Is the proposal adequate and appropriate to address consumer 
harms that occur with the sale of add-on products or services from 
which the consumer cannot benefit? Why or why not? How could the 
proposal be modified to better address such harms?
    33. This provision is intended to prevent conflicting and otherwise 
deceptive representations, and to protect consumers without requiring 
additional disclosures in an already lengthy, disclosure-heavy process. 
Given these concerns, should additional restrictions be placed on all 
add-ons? In particular, the Commission is contemplating whether any 
final Rule should restrict dealers from selling add-ons (other than 
those already installed on the vehicle) in the same transaction, or on 
the same day, the vehicle is sold or leased. Would such a provision 
better protect consumers without unduly burdening competition?
    34. The proposed rule would prohibit dealers from charging for non-
beneficial add-ons, such as nitrogen-filled tires that contain no more 
nitrogen than naturally exists in the air, and GAP insurance that 
cannot be used by the consumer. Are there other add-ons for which 
dealers commonly charge that are similarly non-beneficial and should be 
specifically referenced in any final Rule?
    35. The proposed rule would also prohibit dealers from charging for 
GAP Agreements if the consumer's vehicle or neighborhood is excluded 
from coverage or the loan-to-value ratio would result in the consumer 
not benefitting financially from the agreement. Should any final Rule 
set forth how to calculate the loan-to-value ratio? If so, what should 
such a provision require?
    36. Proposed Sec.  463.5(b) would prohibit a dealer from charging 
for optional add-ons unless the dealer first discloses the vehicle's 
Cash Price without Optional Add-ons and records that a consumer has 
declined to purchase the vehicle at that price. Should the Commission 
consider means to require more affirmative engagement by consumers to 
consciously select add-on products and services? In particular, the 
Commission is contemplating whether any final Rule should require 
separating the purchase of add-ons from the vehicle sale or lease 
transaction, or permit consumers to cancel add-ons (that do not involve 
physical alteration to the vehicle) within a short time after the sale 
or lease transaction is concluded. What practical limitations might 
such additional requirements impose?
    37. Would the proposal prompt dealers to make offers regarding add-
ons at a time and in a manner that is meaningful to consumers, or would 
it result in yet another disclosure being presented to consumers during 
an already disclosure-heavy transaction? If it would result in too many 
disclosures, what other measures could be taken to protect consumers 
from unauthorized add-ons, or from being induced to purchase add-ons 
under false pretenses?
    38. Proposed Sec.  463.5(c) would prohibit dealers from charging 
consumers without their Express, Informed Consent, and would provide 
requirements for what constitutes Express, Informed Consent. Does the 
proposal provide a meaningful way to obtain consent in an already 
disclosure-heavy transaction? If it would result in too many 
disclosures, what other measures could be taken to protect consumers 
from unauthorized charges? Are there any additional requirements that 
should be mandated to gain Express, Informed Consent? How do dealers 
currently obtain consent for charges?
    39. The proposed rule would define Express, Informed Consent to 
exclude signed or initialed documents by themselves (e.g., those 
without a closely proximate disclosure of the basis and amount for the 
charge), preprinted checkboxes, and practices designed or manipulated 
with the substantial effect of subverting or impairing user autonomy, 
decision making, or choice. Should the Commission identify other 
practices that do not, in themselves, constitute Express, Informed 
Consent? Why or why not? Are there other ``dark patterns'' that the 
Commission should address? Is there language, such as in

[[Page 42031]]

other statutes, that the Commission should use to further protect 
consumers from being charged without Express, Informed Consent?
Sec.  463.6: Recordkeeping
    Proposed Sec.  463.6 would require dealers to keep, for a period of 
24 months, records necessary to demonstrate compliance with the 
proposed rule including all materially different advertisements, sales 
scripts, training materials, and marketing materials regarding vehicle 
price, financing, or leasing terms; all materially different copies of 
lists of add-on products and services; consumer transaction documents 
such as purchase orders, financing and leasing agreements (and related 
correspondence, including declination documents as required by proposed 
Sec.  463.5(b)); records to show compliance with monthly payment 
disclosure and GAP sales requirements; and certain written consumer 
complaints and consumer inquiries.
    40. Are the proposed recordkeeping requirements clear, meaningful, 
and appropriate? Should the scope of any of the proposed recordkeeping 
requirements be expanded or narrowed, and if so, how and why?
    41. Would the specified records be appropriate to verify compliance 
with the proposed rule? Are any of the specified records unnecessary to 
verify compliance with the proposed rule? If the records listed are not 
required to be retained, how would such compliance be verified?
    42. Should any additional records be specifically listed?
    43. Is the 24-month record retention period appropriate? Why or why 
not? If not, what period is appropriate?
    44. What are the current record retention policies and practices of 
dealers with respect to the records specified in proposed Sec.  463.6?
    45. What benefits would these recordkeeping requirements provide to 
consumers and businesses? What costs would these recordkeeping 
requirements impose on businesses, including small businesses? What 
would be the overall economic impact of these requirements? Please 
quantify these benefits and costs wherever possible.
    46. What volume of records would have to be maintained to comply 
with this section?
    47. What has been the experience of State and local law enforcement 
agencies with respect to record retention requirements? Have such 
requirements been useful? If yes, how? If no, why not? To what extent 
have recordkeeping requirements impacted businesses?
Sec.  463.9: Relation to State Laws
    48. Does any portion of the proposed rule duplicate, overlap, or 
conflict with any federal, state, or local laws or regulations?
    49. What has been the experience in states that have regulated 
unfair or deceptive conduct involving motor vehicles sales, leasing, 
and financing, including with respect to add-ons? How have any such 
regulations assisted with combatting unfair or deceptive conduct?

IX. Rulemaking Procedures

    Pursuant to the Dodd-Frank Act, the FTC is authorized to prescribe 
rules under Section 553 of the Administrative Procedure Act (``APA'') 
\150\ with respect to unfair or deceptive acts or practices by motor 
vehicle dealers as defined in Section 1029 of the Dodd-Frank Act.\151\ 
Under the Dodd-Frank Act, the FTC's APA rulemaking authority became 
effective as of July 21, 2011, the designated ``transfer date'' 
established by the Treasury Department.\152\ Accordingly, the 
Commission is publishing this Notice of proposed rulemaking pursuant to 
Section 553 of the APA.\153\
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    \150\ 5 U.S.C. 553.
    \151\ 12 U.S.C. 5519.
    \152\ See 75 FR 57252 (Sept. 20, 2010).
    \153\ Pursuant to Section 22(d)(4) of the FTC Act, 15 U.S.C. 
22(d)(4), this Notice of Proposed rulemaking was not included in the 
Commission's Spring 2022 Regulatory Agenda because the Commission 
first considered this notice after the publication deadline for the 
Regulatory Agenda.
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X. Paperwork Reduction Act

    The Paperwork Reduction Act (``PRA''), 44 U.S.C. 3501 et seq., 
requires federal agencies to seek and obtain Office of Management and 
Budget (``OMB'') approval before undertaking a collection of 
information directed to ten or more persons. The proposed rule contains 
disclosure and recordkeeping requirements that constitute ``information 
collection requirements'' as defined by 5 CFR 1320.3(c) under the OMB 
regulations that implement the PRA.
    The Commission estimates that there are approximately 46,525 
franchise, new motor vehicle and independent/used motor vehicle dealers 
in the U.S.\154\
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    \154\ See U.S. Census Bureau, All Sectors: County Business 
Patterns, including ZIP Code Business Patterns, by Legal Form of 
Organization and Employment Size Class for the U.S., States, and 
Selected Geographies: 2019, https://data.census.gov/cedsci/
table?q=CBP2019.CB1900CBP&n=44111%3A44112&tid=CBP2019.CB1900CBP&hideP
review=true&nkd=EMPSZES~001,LFO~001 (listing 21,427 establishments 
for ``new car dealers,'' NAICS code 44111, and 25,098 establishments 
for ``used car dealers,'' NAICS code 44112). The discussion in this 
section of the NPRM concerns facts and statistics for automobiles; 
we invite submissions of comparable information for other types of 
motor vehicles.
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    Estimated Annual Hours Burden: 7,816,819 hours.
    Estimated Annual Labor Cost: $221,870,782.

Disclosure Requirements

    The proposed rule includes disclosure requirements designed to curb 
pricing, leasing, and financing-related deception and unfairness, 
particularly regarding the truthfulness of key terms, the costs of add-
on products and services, and obtaining consumers' consent to charges, 
and to promote competition by ensuring that transparent, law-abiding 
dealers are not competitively disadvantaged.
    Add-on List Disclosures: Under Sec.  463.4(b), the proposed rule 
would require covered motor vehicle dealers that charge for optional 
add-on products and services to disclose clearly and conspicuously in 
advertisements and on any website, online service, or mobile 
application through which they market motor vehicles, and at any 
dealership, an itemized Add-on List of such products and services and 
their prices. This information is necessary to prevent 
misrepresentations regarding add-ons and unfair charges to consumers 
without their awareness.\155\ As set out in detail in the Preliminary 
Regulatory Analysis,\156\ of the 46,525 motor vehicle dealers that 
would be subject to this Rule, the Commission anticipates those that 
charge for such add-ons and do not already maintain a list will require 
approximately 14 hours to create an initial disclosure system, 
including the time necessary to create and review the required Add-on 
List, and to design a system that provides for display of the Add-on 
List on websites or other online services. In addition, the Commission 
anticipates that periodic revision of these lists will be required, at 
an estimated 1 hour of clerical staff time per year. Finally, for 
dealers with an online presence, the Commission estimates 8 additional 
hours of programmer time to integrate this system across the 
dealership's online and mobile applications. Assuming all covered 
dealers charge for such add-ons and do not already maintain this 
information for consumers, this yields an initial burden estimate of 
651,350 hours for the industry (46,525 covered motor vehicle dealers x 
14 hours). The Commission further estimates an

[[Page 42032]]

ongoing, annual periodic revision burden at 46,525 hours (46,525 
covered motor vehicle dealers x 1 hour). Combined, this yields an 
overall estimated annual burden of 697,875 hours for the initial design 
and periodic revision of Add-on Lists.
---------------------------------------------------------------------------

    \155\ See supra Part V.D.
    \156\ See infra Part XII.C.3.
---------------------------------------------------------------------------

    The Commission estimates the associated labor costs for these 
disclosures by applying appropriate hourly labor cost-rates to the 
hours calculated above.\157\ The Commission anticipates that 
managerial, administrative, and programming staff are likely to perform 
the tasks associated with preparation of Add-on Lists, including 
entering data, posting the Add-on Lists in dealerships or submitting 
them for inclusion on a dealer's website or mobile application, and 
revising them as needed. In particular, the Commission estimates as 
follows: 5 hours of time for a finance manager to compile and review a 
master Add-on List, at a cost-rate of $65.54 per hour; 1 hour of review 
by a compliance officer, at a cost-rate of $26.83 per hour; 8 hours of 
time for an programmer to design a system for posting prices on 
location, at a cost-rate of $28.90 per hour; and 1 hour of time for 
administrative support staff to make periodic revisions, at a cost-rate 
of $18.37 per hour. This yields an associated annual labor cost burden 
of $28,105,752 for the industry.
---------------------------------------------------------------------------

    \157\ Applicable wage rates are based on data from the Bureau of 
Labor Statistics' May 2020 National Industry-Specific Occupational 
Employment and Wage Estimates for NAICS industry category 441100--
Automobile Dealers, which is available at https://www.bls.gov/oes/2020/may/oes_nat.htm.
---------------------------------------------------------------------------

    The Commission also anticipates that the estimated 81% of dealers 
with an online presence will require 8 hours of programmer work for 
integration work across online and mobile applications. This yields an 
estimated annual hours burden of 301,480 hours (46,525 motor vehicle 
dealers x 81% x 8 hours). Applying associated costs to this estimate 
yields an annual labor cost burden of $8,712,722 ($28.90 per hour x 81% 
x 8 hours).
    Disclosures Relating to Cash Price without Optional Add-ons: Under 
Sec.  463.5(b), the proposed rule would require covered motor vehicle 
dealers that charge consumers for optional add-on products or services 
to disclose pricing and cost information without such add-ons. First, 
before discussing any aspect of financing for a specific vehicle, aside 
from its Offering Price, the dealer must provide the consumer with an 
itemized disclosure of the vehicle's Cash Price without Optional Add-
ons, along with the option to purchase or finance the vehicle for this 
price, which excludes optional add-on products or services. Second, 
before charging a consumer for an add-on product or service in a 
financed transaction, the dealer must provide the consumer with an 
itemized disclosure of the vehicle's Cash Price without Optional Add-
ons, the finance charge, and any consumer-provided consideration. These 
disclosures must be dated and signed by the consumer and a manager for 
the dealer prior to consummation of the transaction. As with the 
proposed Add-on List provision, this information is necessary to 
prevent misrepresentations regarding the costs of add-ons and to make 
clear that these products and services are optional to the consumer. 
This requirement is also intended to prevent unfair practices where 
dealers include add-ons in contracts without consumer awareness.\158\
---------------------------------------------------------------------------

    \158\ See supra Part V.E; see also supra Part V.D.
---------------------------------------------------------------------------

    As set out in detail in the Preliminary Regulatory Analysis,\159\ 
the Commission anticipates that dealers that charge for optional add-
ons will incur certain initial and ongoing costs to provide the 
disclosures relating to Cash Price without Optional Add-ons. Dealers 
likely will incur some costs to create and implement templates for 
these disclosures, either in paper or electronic form. The Commission 
estimates that these tasks will require approximately 8 hours of work 
by a compliance officer, at a cost-rate of $26.83 per hour; 4 hours by 
a sales manager, at a cost-rate of $63.93 per hour; and 8 hours of 
programmer time, at a cost-rate of $28.90 per hour, for a total of 
$701.56 and 20 hours per average dealer (($26.83 per hour x 8 hours) + 
($63.93 per hour x 4 hours) + ($28.90 per hour x 8 hours)). This yields 
an estimated hours burden for all dealers, in the first year, of 
930,500 hours and an associated labor cost burden of $32,640,079.
---------------------------------------------------------------------------

    \159\ See infra Part XII.C.5.
---------------------------------------------------------------------------

    Dealers are also likely to incur some annual labor costs to 
populate data into these disclosures. The Commission anticipates that 
the added time to input this data for the disclosures relating to Cash 
Price without Optional Add-ons will be minimal, as they consist of 
information that dealers already obtain from the consumer in the 
ordinary course of business in order to complete these vehicle sales 
transactions. The Commission estimates that inputting the data needed 
for the disclosures in Sec.  463.5(b)(1), (b)(2), and (b)(3) will take 
two minutes for a salesperson to complete at a rate of $21.84 per hour. 
This yields an average cost per disclosure of $0.73 (rounded to the 
nearest cent) for completing the required disclosures. Dealers would 
need to provide the Sec.  463.5(b)(1) disclosure for every vehicle they 
offer for sale with any optional add-on products or services; the 
463.5(b)(2) disclosure for every vehicle sale that is financed and 
includes an optional add-on; and the 463.5(b)(3) disclosure for every 
vehicle sale that includes an optional add-on.
    The Commission estimates that approximately 57,866,000 vehicles are 
sold annually, including an estimated 17,059,000 new vehicles and 
40,807,000 used vehicles.\160\ The Commission assumes that each vehicle 
sale involves an offer of optional add-ons, and further estimates that 
approximately 81% of new vehicle sales and 35% of used vehicle sales 
are financed,\161\ and that approximately 94% of new vehicle sales and 
86% of used vehicle sales includes an optional add-on.\162\
---------------------------------------------------------------------------

    \160\ U.S. Dept. of Trans., Bureau of Trans. Stat., New and Used 
Passenger Car and Light Truck Sales and Leases, https://www.bts.gov/content/new-and-used-passenger-car-sales-and-leases-thousands-vehicles (last visited Apr. 25, 2022) (listing 17,059,000 new 
vehicle sales and 40,807,000 used vehicle sales in 2019).
    \161\ Melinda Zabritski, Experian Info. Sol's, Inc., State of 
the Automotive Finance Market Q4 2020 at 5, https://www.experian.com/content/dam/marketing/na/automotive/quarterly-webinars/credit-trends/2020-quarterly-trends/v2-2020-q4-state-automotive-market.pdf (listing 81.12% of new vehicles and 34.59% of 
used vehicles with financing in 2020).
    \162\ Nat'l Auto. Dealers Ass'n, Average Dealership Profile at 1 
(Aug. 2021), https://www.nada.org/media/4129/download?inline 
(reporting ``F&I penetration'' figures of approximately 93.6% for 
new vehicles and 86.2% for used vehicles).
---------------------------------------------------------------------------

    Given these estimates and assumptions, the Commission anticipates 
that dealers will be required to provide the disclosures in Sec.  
463.5(b)(1) in an average of 1,244 transactions per dealer (57,866,000 
transactions / 46,525 motor vehicle dealers).\163\ This yields an 
annual hours burden of 1,929,237 hours or approximately 41 hours per 
average dealer (1,244 x 2/60 hours). The associated annual estimated 
labor cost is $42,250,283 for all dealers (1,244 transactions x 46,525 
dealers x $0.73 per transaction) or approximately $908.12 per average 
auto dealer.
---------------------------------------------------------------------------

    \163\ The Commission calculates the estimated number of covered 
transactions as follows: 57,866,000 total vehicle sales / 46,525 
dealers.
---------------------------------------------------------------------------

    The Commission anticipates that the average dealer will be required 
to provide the disclosures in Sec.  463.5(b)(2) in an average of 543 
transactions per year. This results in an estimated annual burden of 
842,103 hours across the industry or an average of approximately 18 
hours per average auto dealer (543 x

[[Page 42033]]

2/60 hours).\164\ The associated annual labor cost is estimated at 
approximately $18,442,045 for the entire industry or approximately $396 
per average auto dealer (543 transactions x $0.73 per transaction).
---------------------------------------------------------------------------

    \164\ The Commission estimates the estimated number of covered 
transactions as follows: ((17,059,000 new vehicle sales x 81% 
financed x 94% with optional add-ons (i.e., 12,988,722)) + 
(40,807,000 used vehicle sales x 35% financed x 86% with optional 
add-ons (i.e., 12,282,907)) / 46,525 dealers).
---------------------------------------------------------------------------

    The Commission estimates that the average dealer will be required 
to provide the disclosures in Sec.  463.5(b)(3) in an estimated 1,099 
transactions.\165\ This yields an annual hours burden for providing 
required itemizations of optional add-ons that are estimated at 
1,704,366 across the industry or approximately 37 hours per average 
auto dealer (46,525 auto dealers x 1,099 x 2/60 hours). The associated 
labor cost is an estimated $37,325,612 for the industry or 
approximately $802 per average auto dealer (46,525 motor vehicle 
dealers x 1,099 transactions x $0.73).
---------------------------------------------------------------------------

    \165\ The Commission calculates the estimated number of covered 
transactions as follows: ((17,059,000 new vehicle sales x 94% with 
optional add-ons) + (40,807,000 used vehicle sales x 86% with 
optional add-ons)) / 46,525 dealers.
---------------------------------------------------------------------------

    Other Required Disclosures. The proposed rule would prohibit 
dealers from making certain misrepresentations in the course of 
selling, leasing, or arranging financing for motor vehicles. The 
proposed prohibitions are consistent with the existing prohibition on 
misrepresentations under Section 5 of the FTC Act, and do not 
themselves require additional information collection or disclosures. 
Thus, while dealers may elect to undertake monitoring or review to 
ensure compliance, the Commission estimates for present purposes that 
any additional costs associated with the proposed misrepresentation 
prohibitions to be de minimis.
    The proposed rule also would require covered motor vehicle dealers 
to clearly disclose the Offering Price of a motor vehicle in 
advertisements and in response to consumer inquiries. This requirement 
is necessary to address deceptive and unfair practices with respect to 
vehicle pricing representations, whether add-on products and services 
are optional and their costs, and consumer consent to purchase such 
optional products and services.\166\ Vehicle pricing activities are 
usually and customarily performed by dealers in the course of their 
regular business activities. While the proposed provision may increase 
the importance of these activities, or alter when in the course of 
business they are undertaken, the Commission estimates, for present 
purposes, that any additional costs associated with the proposed 
offering price requirement to be de minimis.
---------------------------------------------------------------------------

    \166\ See supra Part V.D.
---------------------------------------------------------------------------

    In addition, the proposed rule would require dealers, when making 
any representation about the monthly payment for a vehicle, to disclose 
the total amount the consumer will pay to purchase the vehicle at that 
monthly payment after making all payments as scheduled, as well as the 
amount of consideration to be provided by the consumer if the total 
amount disclosed assumes the consumer will provide consideration. The 
Commission anticipates that such disclosures would contain information 
already produced in the ordinary course of business and known to 
dealership staff at the time such disclosures would be required. As 
such, the Commission anticipates that this proposed provision would 
merely require a covered motor vehicle dealer to provide readily 
available information, and that the disclosure burdens associated with 
these requirements is likely de minimis.
    Finally, the proposed rule would require covered dealers that sell 
optional add-on products and services to disclose to consumers that 
these products are not required. This requirement is necessary to 
address deceptive and unfair practices regarding these products and 
services, including misrepresentations that these products are required 
when they are not, and charging consumers for such products without the 
consumers' Express, Informed Consent.\167\ The proposed rule would also 
require covered dealers to disclose the total cost of a vehicle when 
making representations about the monthly payment for the vehicle, as 
well as that a lower monthly payment will increase the total cost where 
applicable. These requirements are necessary to address deceptive 
practices with respect to vehicle pricing representations, including 
the use of monthly payment amounts to incorrectly imply savings or 
parity between offers.\168\
---------------------------------------------------------------------------

    \167\ See id.
    \168\ See id.
---------------------------------------------------------------------------

    The Commission anticipates that the disclosure burdens associated 
with these requirements is likely de minimis. These proposed rule 
provisions would merely require a covered motor vehicle dealer to 
provide readily available information to consumers in advertisements or 
direct communications with customers, as applicable.

Recordkeeping

    The proposed rule would require covered motor vehicle dealers to 
retain, for a period of twenty-four months from the date the record is 
created, records sufficient to demonstrate their compliance with the 
Rule and its disclosure requirements. Such records would include 
advertising materials regarding the price, financing or lease of a 
motor vehicle; copies of Add-on Lists offered to consumers; copies of 
the disclosures relating to Cash Price without Optional Add-ons 
required by the Rule; copies of purchase orders and financing and lease 
documents signed by the consumer; and records demonstrating compliance 
with the proposed rule's requirements for add-ons in consumer 
contracts.
    As set out in detail in the Preliminary Regulatory Analysis,\169\ 
the Commission anticipates some incremental recordkeeping burden for 
covered motor vehicle dealers who would be required to retain copies of 
Add-on Lists, disclosures relating to Cash Price without Optional Add-
ons, and other transaction records necessary to demonstrate compliance 
with the proposed rule's requirements.
---------------------------------------------------------------------------

    \169\ See infra Part XII.C.7.
---------------------------------------------------------------------------

    The Commission anticipates that it will take covered motor vehicle 
dealers approximately 15 hours to modify their existing recordkeeping 
systems to retain the required records for the 24-month period 
specified in the proposed rule. This yield a general recordkeeping 
burden of 697,875 hours annually (46,525 motor vehicle dealers x 15 
hours per year).
    The Commission anticipates that programming, administrative, 
compliance, and clerical staff are likely to perform the tasks 
necessary to comply with these recordkeeping requirements. In 
particular, the Commission estimates as follows: 8 hours of time for a 
programmer to design, implement, or update systems for record storage, 
at a cost-rate of $28.90 per hour; 5 hours of additional clerical staff 
work, at a cost-rate of $18.37 per hour; 1 hour of sales manager 
review, at a cost-rate of $63.93 per hour; and 1 hour of review by a 
compliance officer, at a cost-rate of $26.83 per hour. Applying these 
cost-rates to the estimated hours burden described above, the total 
estimated initial labor cost burden is $413.81 per average dealership 
(($28.90 per hour x 8 hours) + ($18.37 per hour x 5 hours) + ($63.93 
per hour x 1 hour) + ($26.83 per hour x 1 hour)), totaling $19,252,510 
(rounded to the nearest dollar) across

[[Page 42034]]

the industry ($413.81 per average dealership x 46,525 dealerships).
    Beyond those records already created and retained in the ordinary 
course of business, proposed Sec.  463.6(a)(4) would require covered 
motor vehicle dealers to create and retain calculations of loan-to-
value ratios in contracts including GAP agreements. This requirement is 
necessary to prevent deception and unfairness relating to the sale of 
GAP agreements under circumstances in which the consumer would not 
benefit from such products. As described above, the Commission 
estimates that covered motor vehicle dealers sell approximately 
57,866,000 vehicles each year. The Commission further estimates that 
approximately 25.7% of such sales include GAP agreements, for an 
estimated total of 14,871,562 covered vehicle sales.\170\
---------------------------------------------------------------------------

    \170\ See Nat'l Consumer Law Ctr., Auto Add-ons Add Up: How 
Dealer Discretion Drives Excessive, Inconsistent, and Discriminatory 
Pricing 9 (Oct. 11, 2017), https://www.nclc.org/images/pdf/car_sales/report-auto-add-on.pdf (nationwide dataset of 1.8 million 
car sale transactions, of which 462,170 included GAP agreements).
---------------------------------------------------------------------------

    The Commission estimates that covered motor vehicle dealers will 
require approximately 1 hour for a sales manager to create and 
implement a loan-to-value calculation template, at a cost-rate of 
$63.93 and 1 hour for a compliance officer to review the template, at a 
cost-rate of $26.83. This yields an estimated initial hours burden for 
the creation of loan-to-value calculation templates for all dealers of 
93,050 hours (46,525 covered motor vehicle dealers x 2 hours). Applying 
the above-described cost-rates, the associated labor cost burden is 
estimated at $4,222,609 for all dealers (($63.93 per hour x 1 hour x 
46,525 dealerships) + ($26.83 per hour x 1 hour x 46,525 dealerships)). 
The Commission also anticipates that, with the template in place, 
covered motor vehicle dealers will expend one minute per sales 
transaction for a salesperson to perform the calculation contemplated 
by this requirement, at a cost rate of $21.84 per hour. As described 
previously, the Commission estimates that covered motor vehicle dealers 
sell approximately 57,866,000 vehicles each year and approximately 
25.7% of such sales include GAP agreements, for an estimated total of 
14,871,562 covered vehicle sales. While the number of motor vehicles 
sold will vary by dealership, this yields an average sales volume of 
320 sales transactions per average dealership per year that include a 
GAP agreement. This yields an estimated annual hours burden for all 
dealers of 248,133 hours (46,525 covered dealers x 320 covered 
transactions x 1/60 hours). Applying the associated labor rates yields 
an estimated annual labor cost for all dealers of $5,419,232 (248,133 
hours x $21.84 per hour).
    Capital and Other Non-Labor Costs: $14,769,361.
    The Commission anticipates that the proposed rule would impose 
limited capital and non-labor costs. Covered motor vehicle dealers 
already have in place existing systems for providing sales and 
contract-related disclosures to motor vehicle buyers and lessees as 
well as persons seeking information during the vehicle-shopping 
process. While the proposed rule's disclosure requirements might make 
limited additions to the types of forms and disclosures that must be 
provided during the process of selling or leasing a motor vehicle, the 
Commission anticipates that these changes will not require substantial 
investments in new systems. Moreover, many dealers may elect to furnish 
some disclosures electronically, further reducing total costs.
    Section 463.4(b) would require dealers who engage in advertising 
and who also charge for optional add-ons to have a website, online 
service, or other mobile application by which to disclose an Add-on 
List. In the Commission's estimation, dealers who engage in covered 
advertising generally already operate a website or other application by 
which they could make such disclosures. As such, the Commission 
estimates the capital costs associated with such additional disclosures 
are likely de minimis.
    Covered motor vehicle dealers already have in place existing 
recordkeeping systems for the storage of documentation they would 
retain in the ordinary course of business irrespective of the Rule's 
requirements, including records associating vehicle financing and 
customer contracts and leases. As set out in detail in the Preliminary 
Regulatory Analysis,\171\ the Commission anticipates the proposed 
rule's additional recordkeeping requirements may result in incremental 
non-labor costs to add capacity to these systems in order to store the 
records. The proposed rule provides that covered motor vehicle dealers 
may keep the required records in any legible form, and in the same 
manner, format, or place as they may already keep such records in the 
ordinary course of business. Accordingly, the proposed rule would not 
require covered persons to invest in new recordkeeping systems and may 
retain records in whatever form they prefer, whether hard copy or 
electronic.
---------------------------------------------------------------------------

    \171\ See infra Part XII.C.7.
---------------------------------------------------------------------------

    The Commission estimates the non-labor costs incurred by dealers 
for providing disclosures in written or electronic form will differ 
based on the method of disclosure employed by the dealer. As explained 
in detail in the Preliminary Regulatory Analysis,\172\ the Commission 
estimates an average physical cost of disclosure of $0.11 across paper 
and electronic disclosure methods--a figure which includes (1) an 
estimated cost of $0.15 per printed disclosure at one single-sided page 
per disclosure, which is based on industry input regarding the printing 
costs associated with the FTC's Used Car Rule Buyers Guides; \173\ and 
(2) a cost of $0.02 per disclosure made electronically.\174\ As noted 
above, dealers would need to provide the Sec.  463.5(b)(1) disclosure 
for every vehicle they offer with any optional add-on products or 
services; the 463.5(b)(2) disclosure for every vehicle sale that is 
financed and includes an optional add-on; and the 463.5(b)(3) 
disclosure for every vehicle sale that includes an optional add-on. The 
estimated cost of providing these three disclosures annually is 
approximately $317.45 per average covered dealer,\175\ totaling 
approximately $14,769,361.
---------------------------------------------------------------------------

    \172\ Id.
    \173\ Fed. Trade Comm'n, Agency Information Collection 
Activities; Proposed Collection; Comment Request; Extension, 84 FR 
38979, 38981 (Aug. 8, 2019) (estimating that average printing cost 
for the one-page, double-sided Buyers Guide is thirty cents). In 
making this estimate for printed disclosures, the Commission assumes 
that all dealers will purchase pre-printed template forms instead of 
producing them internally, although dealers may produce them at 
lower expense using their own office automation technology.
    \174\ The Commission arrived at this figure based on the 
approximate estimated cost differential between hard copy and 
electronic disclosures under the Commission's Franchise Rule. Fed. 
Trade Comm'n, Agency Information Collection Activities; Proposed 
Collection; Comment Request, 85 FR 19479, 19480 (estimating $35 for 
paper disclosures and $5 for comparative electronic disclosures).
    \175\ The Commission obtains this cost estimate as follows: (a) 
(($0.11 x 57,866,000 total vehicle sales) / 46,525 dealers) + (b) 
(($0.11 x (17,059,000 new vehicle sales x 81% financed x 94% with 
optional add-ons) + (40,807,000 used vehicle sales x 35% financed x 
86% with optional add-ons) / 46,525 dealers)) + (c) (($0.11 x 
(17,059,000 new vehicle sales x 94% with optional add-ons) + 
(40,807,000 used vehicle sales x 86% with optional add-ons) / 46,525 
dealers)).
---------------------------------------------------------------------------

    The Commission further estimates that covered motor vehicle dealers 
that store records in hard copy are unlikely to require extensive 
additional storage for physical document retention. Further, due to the 
low cost of electronic storage, the Commission anticipates that motor 
vehicle dealers who store their records electronically

[[Page 42035]]

would incur minimal incremental cost to expand their storage capacity 
in order to comply with the proposed rule's recordkeeping requirements 
due to the low cost of cloud and other electronic storage options. Any 
other capital costs associated with the proposed rule are likely to be 
minimal.
    The FTC invites comments on: (1) Whether the proposed information 
collection requirements should be altered to reduce burdens without 
reducing protections to consumers, and if so, what alteration should be 
made; (2) the accuracy of the agency's burden estimates, including the 
validity of the methodology and assumptions used; (3) ways to enhance 
the quality, utility, and clarity of the information to be collected; 
and (4) ways to minimize the burden of maintaining records and 
providing the required information to consumers.

XI. Regulatory Flexibility Act

    The Regulatory Flexibility Act (``RFA'') \176\ requires that the 
Commission conduct an initial and a final analysis of the anticipated 
economic impact of the amendments on small entities. The purpose of a 
regulatory flexibility analysis is to ensure the agency considers the 
impacts on small entities and examines regulatory alternatives that 
could achieve the regulatory purpose while minimizing burdens on small 
entities. The RFA provides that such an analysis is not required if the 
agency head certifies that the regulatory action will not have a 
significant economic impact on a substantial number of small 
entities.\177\
---------------------------------------------------------------------------

    \176\ 5 U.S.C. 601-612.
    \177\ 5 U.S.C. 605.
---------------------------------------------------------------------------

    The Commission believes that the amendments will not have a 
significant economic impact on small entities, although they will 
likely affect a substantial number of small entities. The proposed rule 
would apply to motor vehicle dealers predominantly engaged in the sale 
and servicing of motor vehicles, the leasing and servicing of motor 
vehicles, or both, as defined in Section 1029 of the Dodd-Frank Act. 
Most covered dealers would be classified as small businesses, as 
explained below.
    The Commission invites comment on the burden on any small entities 
that would be covered and has prepared the following analysis:

1. Description of the Reasons That Agency Action Is Being Considered

    The FTC proposes the Rule to curb misleading practices and 
unauthorized charges to consumers during the vehicle buying or leasing 
process, and to provide an additional enforcement tool to deter dealer 
misconduct and remedy consumer harm. The FTC's law enforcement, 
outreach and other engagement in this area, and the tens of thousands 
of consumer complaints received by the FTC each year indicate that 
dealership misconduct and deceptive tactics persist despite substantial 
federal and state law enforcement efforts. The FTC proposes this Rule 
pursuant to the Dodd Frank Act, which authorized the FTC to prescribe 
rules with respect to unfair or deceptive acts or practices by dealers.

2. Statement of the Objectives of, and Legal Basis for, the Proposed 
Rule

    The objective of the proposed rule is to prevent unfair or 
deceptive acts or practices in the sale, financing, and leasing of 
motor vehicles. The legal basis for the Rule is the FTC Act, 15 U.S.C. 
secs. 41 et seq., and the Dodd-Frank Act, Public Law 111-203. Section 
1029 of the Dodd-Frank Act, 15 U.S.C. 5519, authorizes the Commission 
to prescribe rules with respect to motor vehicle dealers pursuant to 
the FTC Act, which prohibits unfair or deceptive acts or practices in 
or affecting commerce.

3. Description and Estimate of the Number of Small Entities To Which 
the Proposed Rule Will Apply

    The proposed rule applies to motor vehicle dealers as defined in 
Section 1029 of the Dodd-Frank Act.\178\ The Commission estimates that 
there are approximately 46,525 franchise, new motor vehicle, and 
independent/used motor vehicle dealers in the U.S. The Commission 
believes that many of these dealers are small businesses according to 
the applicable Small Business Administration (``SBA'') size standards. 
Under those standards, new vehicle dealers having fewer than 200 
employees each, and used vehicle dealers having annual receipts of less 
than $27 million, are classified as small businesses.\179\
---------------------------------------------------------------------------

    \178\ The Commission is authorized to prescribe rules with 
respect to a motor vehicle dealer that is predominantly engaged in 
the sale and servicing of motor vehicles, the leasing and servicing 
of motor vehicles, or both, as defined in 12 U.S.C. 5519(a).
    \179\ U.S. Small Business Admin. Table of Small Bus. Size 
Standards Matched to North American Indus. Classification System 
[``NAICS''] Codes (effective Aug. 19, 2019), https://www.sba.gov/document/support-table-size-standards.19, 2019), https://www.sba.gov/sites/default/files/2022-05/Table%20of%20Size%20Standards_Effective%20May%202%202022_Final.pdf. 
New motor vehicle dealers are classified as NAICS code 441110. Used 
motor vehicle dealers are classified as NAICS code 441120.
---------------------------------------------------------------------------

    The Commission seeks comment and information regarding the 
estimated number and the nature of small business entities for which 
the proposed rule would have a significant economic impact.

4. Description of the Projected Reporting, Recordkeeping, and Other 
Compliance Requirements

    The proposed rule prohibits unfair or deceptive acts or practices, 
including misleading practices and unauthorized charges, in motor 
vehicle sales, financing, and leasing. To prevent such practices, the 
proposed rule imposes recordkeeping and disclosure requirements. The 
proposed rule contains no reporting requirements.
    The proposed rule would require motor vehicle dealers to clearly 
disclose the Offering Price of a vehicle in advertisements and in 
response to consumer inquires. It would also require dealers to make 
certain disclosures during the sales or leasing process, such as by 
providing consumers with written disclosures relating to Cash Price 
without Optional Add-ons stating price information. To enforce the Rule 
and its disclosure requirements, the proposed rule would require 
dealers to retain records necessary to demonstrate compliance. Among 
others, records that would need to be retained include advertising 
materials regarding the price, financing or lease of a motor vehicle; 
copies of Add-on Lists offered to consumers; copies of disclosures 
relating to Cash Price without Optional Add-ons; copies of purchase 
orders and financing and lease documents signed by the consumer; and, 
records demonstrating compliance with the proposed rule's requirements 
for add-ons in consumer contracts. Such records would need to be 
retained for a period of 24 months from the date they are created, and 
could be kept in the same manner and form (so long as its legible) they 
are already kept in the ordinary course of business.

5. Identification of Duplicative, Overlapping, or Conflicting Federal 
Rules

    Although there are other federal statutes, rules, or policies that 
address motor vehicle sales and financing, the Commission has not 
identified any duplication, overlap, or conflict with the proposed 
rule. The Commission invites comment and information on this issue.

6. Description of Any Significant Alternatives to the Proposed Rule

    The Commission envisioned and drafted this Rule mindful that most

[[Page 42036]]

motor vehicle dealers are small entities. Accordingly, the Commission 
has not proposed any specific alternative compliance mechanisms for 
small businesses. The Commission seeks comment and information on the 
need, if any, for alternative compliance methods that would, consistent 
with the statutory requirements, reduce the economic impact of the 
proposed rule on small entities.

XII. Preliminary Regulatory Analysis

A. Introduction

    The Federal Trade Commission is proposing a rule to provide 
additional protections to consumers when shopping for motor vehicles. 
The proposed rule contains several provisions targeted at increasing 
price transparency for consumers with respect to purchasing, leasing, 
and financing new and used cars and other motor vehicles. The proposed 
rule prohibits misrepresentations in the marketing of motor vehicles 
and motor vehicle financing as well as mandates certain disclosures 
about prices (of both vehicles and add-on options), fees, and interest 
rates. In addition, charging for add-on products from which an 
individual consumer would not benefit is prohibited by the proposed 
rule.
    Section 22 of the FTC Act, 15 U.S.C. 57b-3, requires the Commission 
to issue a preliminary regulatory analysis when publishing a Notice of 
proposed rulemaking. The preliminary regulatory analysis must contain 
(1) a concise description of the need for, and objectives of, the 
proposed rule; (2) a description of reasonable alternatives that would 
accomplish the Rule's stated objectives consistent with applicable law; 
and (3) a preliminary analysis of the benefits and adverse effects of 
the proposed rule and any alternatives, and of the effectiveness of the 
proposed rule and any alternatives in meeting the objectives of the 
proposed rule.

    The NPRM discusses regulatory requirements in the following broad 
areas:

1. Prohibited Misrepresentations
2. Required Disclosure of Offering Price in Advertisements and in 
Response to Inquiry
3. Required Disclosure of Add-on List and Associated Prices
4. Required Disclosure of Total Cost for Financing/Leasing Transactions
5. Prohibition on Charging for Add-ons in Certain Circumstances
6. Requirement to Obtain Express Informed Consent Before any Charges
7. Recordkeeping

    In the analysis below, we describe the anticipated impacts of the 
Rule as currently proposed. Where possible, we quantify the benefits 
and costs and present them separately by provision. If a benefit or 
cost is quantified, we indicate the sources of the data relied upon. If 
an assumption is needed, the text makes clear which quantities are 
being assumed. The Commission solicits comments from the public to 
improve these estimates before promulgation of any final Rule.
    Because of the relative size of the automobile market compared to 
other types of motor vehicle dealers, and the greater availability of 
relevant information for this market, this preliminary analysis 
exclusively considers automobile dealers. The Commission expects the 
analysis and results to be representative of the majority of covered 
entities and transactions, and that expanding the scope of the analysis 
is unlikely to lead to different conclusions. The Commission invites 
submissions of market information for other types of motor vehicles 
such as boats, RVs, and motorcycles that would allow expansion of the 
scope of this analysis.
    A time period of 10 years is used in the baseline scenario because 
FTC rules are subject to review every 10 years. Quantifiable aggregate 
benefits and costs are summarized as the net present value over this 
10-year time frame in Table 1.1. Quantifiable benefits derive from time 
savings due to greater price transparency, leading to a more efficient 
shopping and sales process. Quantifiable costs primarily reflect the 
resources expended by automobile dealers in developing the systems 
necessary to comply with the provisions of the Rule. The discount rate 
reflects society's preference for receiving benefits earlier rather 
than later; a higher discount rate is associated with a greater 
preference for benefits in the present. The present value is obtained 
by multiplying each year's net benefit by the discount rate a number of 
times equal to the number of years in the future the net benefit 
accrues.

           Table 1.1--Present Value of Net Benefits, 2022-2032
------------------------------------------------------------------------
                                                         Present value
------------------------------------------------------------------------
Total Benefits:
    3% discount rate.................................    $36,337,956,234
    7% discount rate.................................     31,081,811,411
Total Costs:
    3% discount rate.................................      1,568,408,501
    7% discount rate.................................      1,360,694,552
Net Benefits:
    3% discount rate.................................     34,769,547,733
    7% discount rate.................................     29,721,116,859
------------------------------------------------------------------------
Note: Total costs reflect highest cost scenarios, for a conservative
  estimate of Net Benefits.

B. Estimated Benefits of Proposed rule

    In this section, we describe the beneficial impacts of the proposed 
rule, provide preliminary quantitative estimates where possible, and 
describe benefits that we can only assess qualitatively. Most of the 
benefits cut across multiple areas addressed by the Rule and these 
benefits may be impossible to identify separately by area. As a result, 
we enumerate the benefits of the Rule not by provision, but by 
category.
1. Consumer Time Savings When Shopping for Motor Vehicle Dealers
    Several provisions of the Rule are associated with time savings as 
a benefit. Required disclosures of relevant prices and prohibitions on 
misrepresentations save consumers time when shopping for a vehicle by 
requiring the provision of salient, material information early in the 
process and eliminating time spent pursuing misleading offers. The 
Commission's enforcement record shows that consumer search and shopping 
is sometimes influenced by deceptive advertising that draws consumers 
to a dealership in pursuit of an advertised deal, only to find out at 
some point later in the process (if at all)

[[Page 42037]]

that the advertised deal is not actually available to them. Motor 
vehicle consumers frequently begin the process of a motor vehicle 
transaction (e.g., by visiting a dealership in response to an ad or 
initiating negotiations in response to a quoted price that is 
incomplete) and then later abandon the transaction when additional 
information is revealed. This bait-and-switch or deceptive door-opener 
advertising has the effect of wasting consumers' time traveling to and 
negotiating with the dishonest dealership, time which would otherwise 
be spent pursuing truthful offers in the absence of deception. 
Unfortunately, the Commission lacks adequate information to determine 
the quantity of such abandoned transactions and the amount of time 
spent pursuing them. As a result, this benefit is unquantified in the 
current analysis. The Commission solicits comment on the frequency of 
and reasons for abandoned transactions in the motor vehicle market in 
order to help quantify this important benefit.
    However, many consumers end up completing transactions under the 
status quo--either because full revelation of prices and terms still 
results in a mutually beneficial transaction or because of constraints 
on the time consumers can dedicate to their search. These consumers 
also spend additional, unnecessary time discovering information that 
dealers would be required to disclose earlier under the proposed rule. 
The Commission expects these disclosures to improve information flows 
and consumer search efficiency, including but not limited to, curbing 
the influence of deception on consumer search and shopping behavior.
    The Commission assumes that, as a result of the proposed rule 
provisions prohibiting misrepresentations and requiring price 
transparency, each consumer who ends up purchasing a vehicle will spend 
3 fewer hours shopping online, corresponding with dealerships, visiting 
dealer locations, and negotiating with dealer employees per motor 
vehicle transaction.\180\ Assuming that motor vehicle purchase, 
financing, and lease transactions will be stable at the 2019 level of 
62.1 million transactions per year, that amounts to a total time 
savings of more than 186.3 million hours per year. According to the 
Bureau of Labor Statistics Occupational Employment Statistics,\181\ the 
average hourly wage of U.S. workers in 2020 was $27.07, and recent 
research suggests that individuals living in the U.S. value their non-
work time at 82% of average hourly earnings.\182\ Thus, the value of 
non-work time for the average U.S. worker would be $22.20 per hour. The 
resulting total benefit from time savings for completed transactions is 
roughly $4.1 billion per year, which translates to a present value of 
between $31.1 billion and $36.3 billion as described in Table 2.1.
---------------------------------------------------------------------------

    \180\ According to the 2020 COX Car Buyer Journey study, 
consumers spent roughly 15 hours researching, shopping, and visiting 
dealerships for each motor vehicle transaction. 3 hours corresponds 
to 20% of an average consumer's time spent on such activities. Cox 
Automotive, 2020 Cox Automotive Car Buyer Journey 5-6 (2020), 
available at https://b2b.autotrader.com/app/uploads/2020-Car-Buyer-Journey-Study.pdf.
    \181\ Bureau of Lab. Stats., May 2020 National Occupational 
Employment and Wage Estimates, United States, https://www.bls.gov/oes/2020/may/oes_nat.htm (listing mean hourly wage of $27.07 for all 
occupations).
    \182\ Daniel S. Hamermesh, What's to Know About Time Use?, 30 J. 
Econ. Survs. 198, 203 (2016).

Table 2.1--Estimated Benefits of Time Savings for Completed Transactions
------------------------------------------------------------------------
                                                           2022-2032
------------------------------------------------------------------------
Completed Transactions:
    Number of vehicle transactions per year \a\......         62,107,000
    Hours saved per transaction......................                  3
    Value of time for vehicle shoppers...............             $22.20
Abandoned Transactions...............................       Unquantified
Total Quantified Benefit:
    3% discount rate.................................    $36,337,956,234
    7% discount rate.................................    $31,081,811,411
------------------------------------------------------------------------
Note: Benefits have been discounted to the present at both 3% and 7%
  rates.
\a\ National Transportation Statistics, Table 1-17.

2. Consumer Welfare Benefits From Curbing Non-Mutually Beneficial 
Transactions or Price Effects of Deception
    Due to the obfuscation and deception that has been identified in 
prior FTC law enforcement actions, some consumers end up consummating 
transactions where the price paid is more than the value they obtain 
from the product or service (i.e., the highest price the consumer would 
be willing to pay were the product marketed transparently and non-
deceptively). In cases where the value the consumer obtains still 
exceeds the cost of providing the product or service, there is still a 
net gain in social welfare from that transaction despite the deception, 
as resources are allocated to a higher value use. However, those 
consumers may receive less benefit (i.e., lower consumer surplus), and 
the dealers may receive higher profits in some transactions relative to 
a full information benchmark because of the higher prices that can be 
sustained through deception. Therefore, the presence of deceptive 
marketing results in a transfer of welfare from these consumers to the 
dishonest dealers. While it is possible that the Rule may prevent such 
transfers of wealth that occur through prices supported by deception, 
the overall effects of the Rule on pricing and competition are 
difficult to predict.
    Typically, transfers of welfare from one set of people in the 
economy to another are documented in a regulatory analysis, but do not 
weigh on the outcome. However, as the redistribution of welfare from 
deceptive firms to victimized consumers is part of the agency's 
mission, transfers of this kind might weigh in favor of proceeding with 
the Rule.
    In cases where the value a consumer obtains is less than the cost 
of providing the product, there is a net loss in social welfare from 
that transaction, as resources are allocated to a lower value use. Even 
under the lower prices that may result from prohibiting the deceptive 
or unfair practices considered in the proposed rule, no such 
transaction would transpire. These cases are emblematic of the 
reduction in social welfare caused by the information asymmetry under 
the status quo. Under the proposed rule, this information asymmetry 
between dealers and

[[Page 42038]]

consumers is mitigated and some fraction of these transactions (and the 
associated welfare losses) are prevented. This avoidance of 
transactions that reduce social welfare is a benefit of the Rule.
i. Advertising Misrepresentations
    As discussed above, some advertising misrepresentations regarding 
prices, the availability of rebates/discounts, monthly payment amounts, 
and amount due at signing are discovered prior to the consumer 
consummating the transaction. In these cases, consumers learn that 
these deceptive door-opener claims were false or misleading, update 
their beliefs about the deal being presented, and either walk away from 
the transaction or proceed with the transaction anyway because they do 
not believe that they will find a better offer (especially considering 
the time and cost to start the process anew, which can be prohibitive 
for some consumers). For these individuals, the time spent negotiating 
under false pretenses and visiting dishonest dealerships is a main 
source of injury.
    In other cases, however, the inaccurate beliefs engendered by such 
misrepresentations can remain through the consummation of the 
transaction. For example, if actual terms differing from those that 
attracted the consumer are buried in the paperwork, the consumer can 
only discover them at signing. The consumer may persist in the belief 
that they are getting the deal that the misleading advertising or 
salesperson's verbal misrepresentations suggested. Only after 
completing a transaction, if ever, does the consumer realize that they 
have been misled into a deal that they would not have agreed to with 
full knowledge of the terms. For these transactions, the cost may 
exceed the consumer's lost time, provided that the true value the 
consumer would receive from the transaction is less than the dealer's 
cost. In these cases, the transaction reduces social welfare. As 
discussed above, these misrepresentations may also have price effects 
that result in transfers from the consumer to a dishonest dealer, which 
the proposed rule would reverse to some extent.
    By prohibiting misrepresentations in advertising and enhancing the 
flow of truthful information to consumers, the proposed rule will 
reduce the number of inefficient transactions. Fewer consumers will end 
up consummating transactions that do not benefit them but occur under 
the status quo due to false beliefs propped up by misleading 
advertisements or other misrepresentations by dealers. This does not 
necessarily imply an overall reduction in vehicle sales, as such 
consumers may instead find transactions with true terms that are 
mutually agreeable. Ensuring that vehicles are sold, leased, or 
financed with terms that are mutually agreeable to consumers and 
dealers will result in an allocation of resources that yields greater 
social welfare overall.
ii. Add-On Products and Services
    Dealers typically offer a host of optional add-on products and 
services that are sold in a bundle with the vehicle (e.g., extended 
warranties, service and maintenance plans, payment programs, guaranteed 
asset protection insurance, emergency road service, VIN etching, 
undercoating, etc.). However, these add-on products are often not 
discussed until near the end of the transaction, sometimes after 
financing terms have already been settled. Some unscrupulous dealers 
then suggest that some set of add-ons may be required (even if they are 
truly optional), inflating the price of the bundle beyond what the 
consumer thought they had negotiated. Alternatively, add-ons that were 
declined by the consumer or not discussed at all, may simply be 
``packed'' into the contract paperwork near the end of the process 
without the consumer's knowledge. The presence or true price of these 
packed add-ons often can be obscured by the dealer only reporting the 
monthly payment amount to the consumer in these late stages of the 
transaction.
    In cases where such misrepresentations are discovered before the 
transaction is completed, the consumer will learn of the add-on price 
and the add-on features, decide whether the product is worth the price 
being charged, and either proceed or not. Again, the consumer's time is 
wasted, but the transaction itself still yields an increase in social 
welfare. Price effects of this type of deception may also result in 
transfers from the consumer to a dishonest dealer, the reversal of 
which may or may not weigh on the net benefits of the proposed rule 
depending on whether redistribution of welfare from dishonest dealers 
to consumers is a goal of the regulation.
    In cases where the consumer never learns of the misrepresented or 
packed add-ons, the consumer may end up paying for add-ons that he or 
she would not have purchased if the dealer had been transparent about 
the terms of the contract. Additionally, when the dealer's cost of 
providing the add-on exceeds the true value the consumer receives, the 
transaction reduces social welfare, as resources are allocated to a 
lower value use. The timely flow of truthful information facilitated by 
the proposed rule can empower consumers to avoid such transactions, 
generating benefits under the Rule.
    Finally, some dealers will charge consumers for add-ons from which 
the consumer cannot reasonably expect to receive any benefit. For 
example, guaranteed asset protection (GAP) is an insurance product that 
covers the difference between what a car is worth and the principal on 
one's loan in the event that the vehicle is totaled and one's auto 
insurance payout would not cover the debt. In some circumstances, a 
consumer's financing contract will outright foreclose this possibility 
(i.e., if the consumer's down payment is sufficiently high and they 
will never owe more than the car is worth). Some dealers, however, will 
still market GAP coverage to such consumers, extracting payments for a 
product that will never provide any benefit to the consumer. In these 
cases, it is obvious that the transaction should never occur when a 
consumer has full information. The proposed rule would prohibit such 
charges, thus eliminating these transactions and generating benefits.
    Without additional information, it is difficult to quantify the 
number of transactions or potential price effects that would be avoided 
by the proposed rule. The Commission invites comments on these issues, 
including information that may be used to quantify this important 
benefit of the proposed rule.
3. Benefits Related to More Transparent Negotiation
    An additional, albeit difficult to quantify, benefit is the 
reduction in discomfort and unpleasantness that consumers associate 
with negotiating motor vehicle transactions under the status quo. 
According to the 2020 Cox Automotive Car Buyer Journey study, filling 
out paperwork, negotiating vehicle price, and dealing with salespeople 
are three of the top four frustrations for consumers at car 
dealerships.\183\ Under the proposed rule, all three of these issues 
will be mitigated somewhat by the transparency facilitated by the 
Rule's required disclosures. As a result, the time that consumers spend 
shopping and negotiating motor vehicle transactions will be less 
stressful. The Commission invites comment on the best approach to 
quantifying the overall benefits of the

[[Page 42039]]

Rule's provisions that reduce information asymmetries in search and 
negotiation.
---------------------------------------------------------------------------

    \183\ Cox Automotive, 2020 Cox Automotive Car Buyer Journey 37 
(2020), available at https://b2b.autotrader.com/app/uploads/2020-Car-Buyer-Journey-Study.pdf.
---------------------------------------------------------------------------

C. Estimated Costs of Proposed Rule

    In this section, we describe the costs of the proposed rule 
provisions as enumerated in Part XII.A, provide preliminary 
quantitative estimates where possible, and describe costs that we can 
only assess qualitatively.
1. Prohibited Misrepresentations
    The misrepresentations prohibited by the proposed rule are all 
material and would therefore be considered deceptive under Section 5 of 
the FTC Act. As a result, motor vehicle dealers who are compliant with 
Section 5 will continue to be compliant under this provision of the 
proposed rule. Accordingly, we present one scenario in Table 3.1 where 
dealers conduct no additional review.
    However, because of the enhanced penalty associated with violating 
the Rule (relative to a de novo violation of Section 5 of the FTC Act), 
dealers may choose to incur additional administrative burdens and costs 
in order ensure compliance. We present another scenario in Table 3.1 
where dealers employ professionals to engage in additional compliance 
review for all new advertisements, websites, listings, etc. For this 
scenario, the Commission assumes a professional will spend 5 additional 
minutes reviewing each public-facing representation and that each 
dealer produces an average of 150 unique marketing representations per 
year.\184\ At a labor rate of $26.83 per hour for compliance officers 
employed at auto dealers, this cost is estimated at $15.6 million per 
year.\185\ The total present value of costs is tabulated in Table 3.1. 
The Commission seeks comments on the foregoing assumptions required to 
reach these estimates.
---------------------------------------------------------------------------

    \184\ While many dealers disseminate more than 150 marketing 
representations per year, most are variants on the same underlying 
``model'' marketing representation. It is these materially distinct 
``models'' that we consider in this scenario.
    \185\ Wage data for dealer employees comes from the U.S. Bureau 
of Labor Statistics, Industry-Specific Occupational Employment and 
Wage Estimates, https://www.bls.gov/oes/2020/may/naics4_441100.htm, 
unless otherwise noted.

 Table 3.1--Estimated Compliance Costs for Prohibited Misrepresentations
------------------------------------------------------------------------
                                                             2022-2032
------------------------------------------------------------------------
Scenario 1--No Review:
    No cost.............................................              $0
                                                         ---------------
        Total Cost......................................               0
------------------------------------------------------------------------
Scenario 2--Heightened Compliance Review:
Number of dealers \a\...................................          46,525
Number of documents per dealer per year.................             150
Minutes of review per document..........................               5
Cost per hour of review.................................          $26.83
                                                         ---------------
        Total Cost:
            3% discount rate............................     137,092,486
            7% discount rate............................     117,262,588
------------------------------------------------------------------------
Note: In scenarios with ongoing expenses, costs have been discounted to
  the present at both 3% and 7% rates.
\a\ County Business Patterns 2019, NAICS Code 4411 (Automobile Dealers,
  used and new)

2. Required Disclosure of Offering Price in Advertisements and in 
Response to Inquiry
    The proposed rule requires all dealers to disclose an Offering 
Price in any advertisement that references an individual vehicle or in 
response to any consumer inquiry about an individual vehicle, as well 
as on the disclosures required at various points in the negotiation. 
Since dealers already choose prices for all vehicles under the status 
quo, we present one scenario in Table 3.2 where there is no cost to 
dealers of complying with this requirement.
    However, another scenario accounts for the increased cost to the 
dealers resulting from the increased importance of the pricing decision 
under the proposed rule. The discussion below considers the marginal 
costs to the dealer associated with calculating prices that conform to 
a certain definition and are associated with penalties should they fail 
to conform to that definition. We assume that all dealers will incur 
some upfront cost to create/update a pricing model that incorporates 
the requirements of the Rule. The Commission assumes that each dealer 
employs 8 hours of sales and marketing manager time and 8 hours of 
programmer time--at hourly rates of $63.93 and $28.90, respectively--in 
order to reformulate their pricing system to comply with the required 
disclosures. This total cost is estimated to be $34.6 million. Both 
scenarios are summarized in Table 3.2.
    The Commission further assumes that, once calculated, the cost of 
including this information in response to consumer inquiries about 
specific vehicles will be negligible to the extent that the dealer 
would respond to such inquiries under the status quo baseline. If, 
however, this provision leads to a behavioral adjustment by some 
dealerships to not respond at all to consumer inquiries about specific 
vehicles, there may be associated costs to consumers and dealers 
relative to the baseline. The Commission lacks enough information to 
determine whether and the extent to which such behavioral responses 
would occur or what the welfare costs of those adjustments would be. As 
a result, these costs are left unquantified in the preliminary 
analysis.
    In addition to the expenditure associated with pricing the 
vehicles, there is an opportunity cost to dealers and consumers 
associated with mandating disclosures of Offering Prices on 
advertisements. If dealers choose to convey the same amount of 
information about offered vehicles as before disclosure was required, 
they must reformat their advertisements accordingly, spending the 
required resources to do so. If not, dealers must choose which 
information will be replaced by the mandated Offering Price disclosure. 
Finally, it is also possible that some dealers will choose to comply by 
refraining from advertising

[[Page 42040]]

individual vehicles or responding to consumer inquiries about specific 
vehicles, which would require consumers to seek this information 
through some means other than an advertisement, thus increasing their 
costs of search. These opportunity costs are difficult to estimate and 
our preliminary analysis does not include quantification of these 
impacts. The Commission seeks comments on these costs, particularly 
regarding how dealers anticipate complying with these requirements, in 
order to reach more accurate estimates of costs.

  Table 3.2--Estimated Compliance Costs for Offering Price Disclosures
------------------------------------------------------------------------
                                                             2022 only
------------------------------------------------------------------------
Scenario 1--No Review:
    No cost.............................................              $0
                                                         ---------------
        Total Cost......................................               0
------------------------------------------------------------------------
Scenario 2--Calculation of Offering Price:
    Number of dealers...................................          46,525
    Pricing hours per dealer............................               8
    Cost per hour of pricing............................          $63.93
    Programming hours per dealer........................               8
    Cost per hour of programming........................           28.90
                                                         ---------------
        Total Cost......................................      34,551,326
------------------------------------------------------------------------

3. Required Disclosure of Add-on List and Associated Prices
    The proposed rule requires all dealers to disclose an itemized menu 
of all optional add-on products and services along with prices on all 
dealer-operated websites, online services, and mobile applications as 
well as at all dealership locations. As add-on product pricing is not 
uniformly posted publicly in dealerships or on dealer websites at 
baseline, compliance with the Rule will require every dealer who 
charges for optional add-ons to create a public-facing master Add-on 
List and a system for posting prices at their dealerships. In addition, 
every dealer with an online presence must create a system for posting 
add-on prices online and via any applications they may publish. Without 
additional information on how many dealers charge for optional add-ons, 
the Commission assumes that every dealer incurs an upfront cost, 
employing a finance manager for 5 hours at an hourly rate of $65.54 to 
create the master Add-on List and a compliance manager for 1 hour at an 
hourly rate of $26.83 to review the master list to ensure it satisfies 
the requirements under the Rule. In addition, each dealer will employ 8 
hours of programmer time at an hourly rate of $28.90 in order to design 
such a system for posting prices on location. Additionally, each dealer 
with an online presence (assumed 81%) employs 8 additional hours of 
programmer time to implement such a system across their online and 
mobile applications. The Commission further assumes that periodic 
revision of these lists will be required and budgets 1 hour of clerical 
staff time per year (at a cost of $18.37 per hour) for this task. These 
costs are summarized in Table 3.3.

         Table 3.3--Estimated Compliance Costs for Add-On Lists
------------------------------------------------------------------------
                                             2022 only       2022-2032
------------------------------------------------------------------------
Creation of Add-On Lists and display      ..............  ..............
 systems
    Number of dealers...................          46,525  ..............
    Finance manager hours per dealer....               5  ..............
    Cost per hour of list development...          $65.54  ..............
    Compliance manager hours per dealer.               1  ..............
    Cost per hour of compliance review..          $26.83  ..............
    Programmer hours per dealer.........               8  ..............
    Number of dealers with online              37,685.25  ..............
     presence...........................
    Add'l programmer hours per online                  8  ..............
     dealer.............................
    Cost per hour of programming........          $28.90  ..............
                                         -------------------------------
        Subtotal........................     $35,963,918  ..............
------------------------------------------------------------------------
Periodic revision of lists                                ..............
    Number of dealers...................                          46,525
    Clerical hours spent revising Add-on                               1
     List...............................
    Cost per hour of revision...........                          $18.37
                                         -------------------------------
 Subtotal
            3% discount rate............  ..............      $7,509,173
            7% discount rate............  ..............      $6,423,000
                                         -------------------------------
 Total Cost
            3% discount rate............  ..............     $43,473,091
            7% discount rate............  ..............     $42,386,918
------------------------------------------------------------------------
Note: In scenarios with ongoing expenses, costs have been discounted to
  the present at both 3% and 7% rates.


[[Page 42041]]

4. Required Disclosure of Total Financing/Contract Costs
    The proposed rule requires all dealers to disclose, in any 
transaction that features a monthly payment, the total cost of the 
financing/leasing contract. In addition, in any comparison of two 
contracts with different monthly payments, the dealer is required to 
disclose that the contract with the lower monthly payment features a 
higher total cost (if true) and disclose the total cost corresponding 
to each monthly payment offer. We consider two scenarios that bear on 
the mechanical costs of implementing the requirements under these 
provisions. In the first scenario, dealers incur a one-time, upfront 
cost when designing these disclosures and informing associates of their 
obligations to provide the disclosures, but incur negligible ongoing 
costs on a per transaction basis. This reflects a compliance regime 
where dealers already generate the required information during the 
normal course of business and must only convey it to consumers verbally 
at an appropriate point in the transaction. In the second scenario, 
dealers incur an additional ongoing cost per financed transaction in 
order to communicate the required disclosures to consumers in writing. 
This reflects a compliance regime where dealers may or may not generate 
the required information during the normal course of business and/or 
find it necessary to maintain a documentary record of compliance with 
the Rule.
    The upfront costs of complying with this provision are relatively 
limited; every dealer must create a template disclosure script that 
contains this information and communicate it to associates so that they 
understand their obligations. The Commission assumes an employee will 
spend 8 hours creating this disclosure and informing sales staff. At a 
labor rate of $26.83 for compliance managers, this cost is estimated at 
$10 million.
    For the second scenario involving ongoing costs, we estimate there 
are roughly 32 million vehicle transactions each year subject to this 
requirement (financed sales of new and used vehicles plus leased 
vehicles). The Commission assumes an employee will spend 2 minutes per 
vehicle populating these disclosures and dealers will incur a printing 
cost of $0.15 per transaction. At a labor rate of $21.84 for sales 
staff, the total additional cost under this scenario is estimated at 
$213.4-$249.5 million; see Table 3.4.

  Table 3.4--Estimated Compliance Costs for Financing Cost Disclosures
------------------------------------------------------------------------
                                             2022 only       2022-2032
------------------------------------------------------------------------
Scenario 1--Creation of disclosure only
    Number of dealers...................          46,525  ..............
Compliance manager hours per dealer.....               8  ..............
Cost per hour of disclosure creation....          $26.83  ..............
Scenario 1--Total Cost                        $9,986,126  ..............
Scenario 2--Disclosures per transaction
    New vehicle sales per year \a\......  ..............      17,059,000
    % New vehicle sales involving         ..............             81%
     financing \b\......................
    Used vehicle sales per year.........  ..............      40,807,000
    % Used vehicle sales involving        ..............             35%
     financing..........................
    New vehicle leases per year.........  ..............       4,242,000
    Total transactions involving monthly  ..............      32,342,240
     payment/financing..................
    Disclosure minutes per transaction..  ..............               2
    Cost per hour of disclosure.........  ..............          $21.84
    Printing costs per disclosure.......  ..............           $0.15
Subtotal
    3% discount rate....................  ..............    $249,494,625
    7% discount rate....................  ..............    $213,406,193
Scenario 2--Total Cost
    3% discount rate....................  ..............    $259,480,751
    7% discount rate....................  ..............    $223,392,319
------------------------------------------------------------------------
Note: In scenarios with ongoing expenses, costs have been discounted to
  the present at both 3% and 7% rates.
\a\ National Transportation Statistics 2021, Table 1-17.
\b\ Experian Information Solutions, Inc., State of the Automotive
  Finance Market Q4 2020.

5. Prohibition on Charging for Add-ons in Certain Circumstances
    The proposed rule prohibits dealers from marketing or selling add-
on products or services from which the targeted consumer would not 
benefit. Compliance with this provision will require dealers to have a 
transaction-level system for identifying consumers who will not benefit 
or, in some cases, predicting the potential consumer benefit from 
particular add-on products and services. In addition, this system will 
have to be supplemented with policies and transaction-level rules about 
when add-on products and services can be offered. Finally, because 
dealers will not always have all of the relevant information at their 
disposal at the point of sale, such a system is likely to falsely 
identify some transactions as non-beneficial for the consumer. In cases 
where consumers would benefit in excess of the price of the add-on 
product or service, this provision will result in welfare costs 
associated with the foreclosure of such transactions.\186\ At this 
stage, all of these costs are difficult to quantify. The Commission 
invites comment from dealers and consumers in order to assess the 
difficulty of implementing this requirement and the possibility for 
foreclosure of mutually beneficial transactions.
---------------------------------------------------------------------------

    \186\ The benefits from transactions correctly identified as 
non-beneficial to the consumer are discussed at supra Part XII.B.2.
---------------------------------------------------------------------------

    The proposed rule also prohibits dealers from charging for any 
optional add-on products or services unless dealership employees make 
certain disclosures at various points in the buying process. Before 
referencing any financing terms (other than Offering Price) for a 
specific vehicle or consummating a cash transaction, the dealer must 
disclose the total cost of purchasing the vehicle in cash--without any 
charges for optional add-ons or financing--in a format that itemizes 
the Offering Price; any discounts, rebates, or

[[Page 42042]]

trade-in values; and required government charges. The dealer must 
further indicate clearly that the consumer has the option to purchase 
the vehicle for this amount in cash and obtain the consumer's signed 
declination of that option.
    Furthermore, before charging for any optional add-ons in a 
transaction involving financing, the dealer must disclose the total 
cost of financing the vehicle--without any charges for optional add-
ons--in a format that itemizes the Offering Price; any discounts, 
rebates, or trade-in values; any cash down payment made; and required 
government charges. The dealer must also indicate clearly at this point 
that the consumer has the option to finance the vehicle for this amount 
and obtain the consumer's signed declination of that option. Finally, 
before charging for any optional add-ons, the dealer must disclose the 
total cost of purchasing or financing the vehicle plus the add-ons 
selected by the consumer--either as a separately itemized total cash 
price for a non-financed transaction or a separately itemized total 
price for a financed transaction.
    In order to comply with these disclosure provisions, each dealer 
will have to design form disclosures that contain the required 
information, create a system for populating these forms, and then 
provide the disclosures in writing, with the appropriate information 
filled in, to each consumer prior to completing the transaction. We 
assume that each consumer will receive each disclosure required by the 
provisions exactly once during each transaction (if relevant).\187\
---------------------------------------------------------------------------

    \187\ One consequence of this provision is that consumers, with 
the benefit of clear disclosure of the various prices, will 
renegotiate some aspect of the sale in order to obtain a more 
favorable deal. Any such renegotiation would require the completion 
of another disclosure prior to consummating the transaction, which 
is assumed away here.
---------------------------------------------------------------------------

    The Commission assumes that each dealer will employ 8 hours of 
compliance manager time (at a rate of $26.83) and 4 hours of sales 
manager time (at a rate of $63.93) creating these disclosures, and 8 
hours of programmer time (at a rate of $28.90) creating a system to 
populate these forms when provided inputs by sales staff. We further 
assume that sales staff will spend 2 minutes per disclosure (at a rate 
of $21.84 per hour) updating, printing, and delivering these forms to 
consumers and that the physical costs of delivering the disclosure are 
roughly $0.11 per disclosure.\188\ One disclosure is required for all 
new and used vehicle sales, an additional disclosure is required for 
transactions with optional add-ons (94% new and 86% used), and a third 
disclosure would be required for financed transactions with optional 
add-ons (76% new and 30% used).\189\ All of these costs are summarized 
in Table 3.5. The Commission seeks comments on these costs, 
particularly regarding how dealers anticipate complying with these 
requirements, in order to reach more accurate estimates of costs.
---------------------------------------------------------------------------

    \188\ The physical costs are $0.15 per paper disclosure and 
$0.02 per electronic disclosure, assuming that 27% are made 
electronically. This assumption is informed by a consumer survey 
that indicates 73% of consumers with motor vehicles prefer to 
receive registration renewal notices by mail as opposed to 
electronically. See Consumer Action, Your opinion wanted: Paper vs. 
electronic bills, statements and other communications (Winter 2018-
2019), https://www.consumer-action.org/downloads/Consumer_Action_Paper_v_electronic_survey.pdf.
    \189\ We implicitly assume there is no correlation between the 
presence of optional add-ons and the use of financing in a 
transaction, such that we can multiply the percentages. We also 
assume the percentage of sales featuring optional add-ons will not 
decrease in response to the Rule, although decreasing the frequency 
of deceptive or unauthorized sales is a significant channel through 
which consumer and social benefits may accrue.

     Table 3.5--Estimated Compliance Costs for Itemized Disclosures
------------------------------------------------------------------------
                                          2022 only        2022-2032
------------------------------------------------------------------------
Creation of disclosures
    Number of dealers................          46,525  .................
    Compliance manager hours per                    8  .................
     dealer..........................
    Cost per hour of compliance                $26.83  .................
     manager.........................
    Sales manager hours per dealer...               4  .................
    Cost per hour of sales manager...          $63.93  .................
    Programmer hours per dealer......               8  .................
    Cost per hour of programming.....          $28.90  .................
                                      ----------------------------------
        Subtotal.....................     $32,640,079  .................
------------------------------------------------------------------------
Disclosure delivery (per transaction)
    New vehicle sales per year.......                         17,059,000
    % New vehicle sales involving                                    94%
     optional add-ons \a\............
    % New vehicle sales involving                                    81%
     financing.......................
    Used vehicle sales per year......                         40,807,000
    % Used vehicle sales involving                                   86%
     optional add-ons \b\............
    % Used vehicle sales involving                                   35%
     financing.......................
    Minutes per disclosure...........                                  2
    Cost per hour of disclosure......                             $21.84
    Physical costs per disclosure....                              $0.11
------------------------------------------------------------------------
        Subtotal.....................
            3% discount rate.........                       $994,356,865
            7% discount rate.........                       $850,526,991
        Total Cost...................
            3% discount rate.........                     $1,026,996,944
            7% discount rate.........                       $883,167,070
------------------------------------------------------------------------
Note: In scenarios with ongoing expenses, costs have been discounted to
  the present at both 3% and 7% rates.
\a\ National Automobile Dealers Association, Average Dealership Profile
  (Aug. 2020)
\b\ National Automobile Dealers Association, Average Dealership Profile
  (Aug. 2020)


[[Page 42043]]

6. Requirement To Obtain Express Informed Consent Before Any Charges
    The proposed rule requires dealers to obtain Express Informed 
Consent before charging any consumer for any product or service in 
association with the sale, financing, or lease of a vehicle. It is the 
understanding of the Commission that all dealers that are complying 
with the law currently have policies in place to prevent charges 
without consent; it is unclear what additional practices for those 
dealers will be required to comply with this provision.
7. Recordkeeping
    The proposed rule requires dealers to retain records of all 
documents pertaining to Rule compliance. These recordkeeping 
requirements include:
     Copies of all materially different marketing materials, 
sales scripts, and training materials that discuss sales prices and 
financing/lease terms.
     Copies of all materially different Add-on Lists.
     Records demonstrating that all add-ons charged for meet 
the requirements under the Rule, including calculations of loan-to-
value ratios in contracts including GAP Agreements.
     Copies of all purchase orders, financing and lease 
contracts signed by the consumer (whether or not final approval is 
received), and all written communications with any consumer who signs a 
purchase order or financing or lease contract.
     Copies of all written consumer complaints, inquiries 
related to add-ons, and inquiries and responses about individual 
vehicles.
    Most of these documents are already being produced in the normal 
course of business prior to the Rule, or the costs of creating them 
have already been accounted for in previous sections. The Commission 
assumes that each dealer incurs an upfront cost, employing 8 hours of 
programmer time, 5 hours of clerical time, 1 hour of sales manager 
time, and 1 hour of compliance officer time, at hourly rates of $28.90, 
$18.37, $63.93, and $26.83, respectively, in order to upgrade their 
systems and create the templates necessary to accommodate retention of 
all relevant materials. In addition, loan-to-value calculations are now 
required for all transactions with GAP Agreements, the creation of 
which has not been accounted for in previous sections. The Commission 
assumes that each dealer employs 1 additional minute of sales staff 
time per transaction with a GAP agreement in order to populate and 
store all relevant materials. These costs are summarized in Table 3.6.
    We expect that some small dealerships may not have the ability to 
automate these processes in a way that reduces the ongoing costs of 
recordkeeping to the level stated here. We invite comment on the 
proportion of dealerships that would rely more heavily on manual record 
retention and the associated impact on costs so that we may update our 
cost estimates for this provision accordingly.
    In addition, the expansion of the volume of records that dealers 
are required to retain and manage will likely require investment in 
additional IT systems and hardware. In the absence of information 
regarding the volume of new data (e.g., numbers of inquiries per 
dealer, numbers of consumer complaints, communications per consummated 
transaction, etc.), the Commission leaves these capital costs 
unquantified in the preliminary analysis and seeks comment from 
stakeholders in order to obtain the information necessary to estimate 
costs.

         Table 3.6--Estimated Compliance Costs for Recordkeeping
------------------------------------------------------------------------
                                             2022 only       2022-2032
------------------------------------------------------------------------
Updating systems
    Number of dealers...................          46,525  ..............
    Programming hours per dealer........               8  ..............
    Cost per hour of programming........          $28.90  ..............
    Clerical hours per dealer...........               5  ..............
    Cost per hour of clerical work......          $18.37  ..............
    Sales manager hours per dealer......               1  ..............
    Cost per hour of sales manager                $63.93  ..............
     review.............................
    Compliance officer hours per dealer.               1  ..............
    Cost per hour of compliance review..          $26.83  ..............
                                         -------------------------------
        Subtotal........................     $19,252,510  ..............
------------------------------------------------------------------------
Recordkeeping (per transaction)
    Number of motor vehicle sales \a\...  ..............      57,866,000
    % of sales with GAP agreement \b\...  ..............             26%
    Sales staff minutes per transaction.  ..............               1
    Cost per hour of recordkeeping......  ..............          $21.84
                                         -------------------------------
 Subtotal
            3% discount rate............  ..............     $47,561,392
            7% discount rate............  ..............     $40,681,820
------------------------------------------------------------------------
 Total Cost
            3% discount rate............  ..............     $66,813,902
            7% discount rate............  ..............     $59,934,330
------------------------------------------------------------------------
Note: In scenarios with ongoing expenses, costs have been discounted to
  the present at both 3% and 7% rates.
\a\ National Transportation Statistics, Table 1-17
\b\ National Consumer Law Center, Auto Add-ons Add Up: How Dealer
  Discretion Drives Excessive, Inconsistent, and Discriminatory Pricing

D. Other Impacts of Proposed Rule

    As the status quo in this industry features consumer search 
frictions, shrouded prices, deception, and obfuscation, dealers likely 
charge higher prices than could be supported under the Rule for a 
number of products and services. The Commission expects that prices are 
likely to adjust in response to the transparency facilitated by the new 
Rule. Part XII.B discussed the benefits

[[Page 42044]]

that occur when quantities adjust in a more transparent and less 
deceptive equilibrium. Price adjustments typically serve to transfer 
welfare from one side of the market to the other. For example, in a 
typical market if quantity sold remains constant in response to the 
implementation of a rule but prices decrease, consumer welfare would 
increase, but producer profits would decrease by roughly the same 
amount, leaving total social welfare roughly constant. However, if the 
Rule curbs price effects caused by deception, the transfers caused by 
these price effects would redistribute welfare away from dishonest 
dealers and toward consumers, which may be an explicit goal of the 
rule.
    In addition, deceptive practices by dishonest dealers lead 
consumers to engage with those dealers instead of honest dealerships. 
Under the proposed rule, some business that would otherwise have gone 
to dealers using bait-and-switch tactics or deceptive door opening 
advertisements will now go to honest dealerships. Again, assuming that 
the costs of the firms are similar, any one-for-one diversion of sales 
from one set of businesses to another is generally characterized as a 
transfer under the OMB guidelines for regulatory impact analysis. 
However, in this case, it would represent a transfer from the set of 
dishonest dealers to honest dealers, which may weigh differently if 
profits from law violations are not counted towards social welfare in 
the regulatory analysis.
    While each provision above will affect consumer prices for 
vehicles, add-ons, financing etc. and the distribution of sales across 
dealerships, estimating the magnitudes of these effects is difficult 
and requires information that is currently not available. As a result, 
we have not attempted to quantify these impacts. However, these 
transfers should be documented because, at minimum, they inform the 
distributional effects of the proposed rule. The Commission invites 
comment on how prices might be expected to respond to the proposed 
rule, in order to quantify its price effects and resulting 
distributional impact or impact on net benefits and costs.

E. Conclusion

    In the preceding Preliminary Regulatory Analysis, we have attempted 
to catalog and quantify the incremental benefits and costs of the 
provisions included in the proposed rule. Extrapolating these benefits 
out over the 10-year assessment period and discounting to the present 
provides an estimate of the present value for total benefits and costs 
of the proposed rule, with the difference--net benefits--providing one 
measure of the value of regulation.
    The present value of benefits for consumers from the proposed 
rule's requirements over a 10-year period using a 7% discount rate is 
estimated at $31.1 billion. The present value of costs for covered 
motor vehicle dealers of complying with the proposed rule's 
requirements over a 10-year period using a 7% discount rate is 
estimated at $1.4 billion. This generates an estimate of the present 
value of net benefits equal to $29.7 billion using a discount rate of 
7%.
    Consequently, this Preliminary Regulatory Analysis indicates that 
adoption of the proposed rule would result in benefits to the public 
that outweigh the costs.

                Present Value of Net Benefits, 2022-2032
------------------------------------------------------------------------
                                                         Present value
------------------------------------------------------------------------
Total Benefits:
    3% discount rate.................................    $36,337,956,234
    7% discount rate.................................    $31,081,811,411
------------------------------------------------------------------------
Total Costs:
    3% discount rate.................................     $1,568,408,501
    7% discount rate.................................     $1,360,694,552
------------------------------------------------------------------------
Net Benefits:
    3% discount rate.................................    $34,769,547,733
    7% discount rate.................................    $29,721,116,859
------------------------------------------------------------------------
Note: Total costs reflect highest cost scenarios, for a conservative
  estimate of Net Benefits.

List of Subjects in 16 CFR Part 463

    Consumer protection, Motor vehicles, Reporting and recordkeeping 
requirements, Trade practices.

    For the reasons stated in the preamble, the Federal Trade 
Commission proposes to add part 463 to subchapter D of Title 16 of the 
Code of Federal Regulations as follows:

PART 463--MOTOR VEHICLE TRADE REGULATION RULE

Sec.
463.1 Authority.
463.2 Definitions.
463.3 Prohibited misrepresentations.
463.4 Disclosure requirements.
463.5 Dealer Charges for add-ons and other items.
463.6 Recordkeeping.
463.7 Waiver not permitted.
463.8 Severability.
463.9 Relation to State laws.

    Authority:  15 U.S.C. 41 et seq.; 12 U.S.C. 5519.


Sec.  463.1  Authority.

    This part is promulgated pursuant to Section 1029 of the Dodd-Frank 
Wall Street Reform and Consumer Protection Act of 2010, 12 U.S.C. 
5519(d). It is an unfair or deceptive act or practice within the 
meaning of Section 5(a)(1) of the Federal Trade Commission Act (15 
U.S.C. 45(a)(1)) to violate any applicable provision of this part, 
directly or indirectly, including the recordkeeping requirements which 
are necessary to prevent such deceptive acts or practices and to 
enforce this part.


Sec.  463.2  Definitions.

    (a) Add-on or Add-on Product(s) or Service(s) means any product(s) 
or service(s) not provided to the consumer or installed on the vehicle 
by the motor vehicle manufacturer and for which the Motor Vehicle 
Dealer, directly or indirectly, charges a consumer in connection with a 
vehicle sale, lease, or financing transaction.
    (b) Add-on List means an itemized list of all optional Add-on 
Products or Services for which the Motor Vehicle Dealer, directly or 
indirectly, charges consumers. The Add-on List must Clearly and 
Conspicuously disclose each such optional Add-on and the price of each 
such Add-on. If the Add-on price varies, the disclosure must include 
the price range the typical consumer will pay instead of the price.
    (c) Cash Price without Optional Add-ons means Offering Price, plus 
required Government Charges, minus any discounts, rebates, or trade-in 
valuation amounts, and excludes optional Add-ons.
    (d) Clearly and Conspicuously means in a manner that is difficult 
to miss (i.e., easily noticeable) and easily understandable, including 
in all of the following ways:
    (1) In any communication that is solely visual or solely audible, 
the disclosure must be made through the same means through which the 
communication is presented. In any communication made through both 
visual and audible means, such as a television advertisement, the 
disclosure must be presented simultaneously in both the visual and 
audible portions of the communication even if the representation 
requiring the disclosure is made in only one means.
    (2) A visual disclosure, by its size, contrast, location, the 
length of time it appears, and other characteristics, must stand out 
from any accompanying text or other visual elements so that it is 
easily noticed, read, and understood.
    (3) An audible disclosure, including by telephone or streaming 
video, must be delivered in a volume, speed, and

[[Page 42045]]

cadence sufficient for ordinary consumers to easily hear and understand 
it.
    (4) In any communication using an interactive electronic medium, 
such as the Internet or software, the disclosure must be unavoidable.
    (5) The disclosure must use diction and syntax understandable to 
ordinary consumers and must appear in each language in which the 
representation that requires the disclosure appears.
    (6) The disclosure must comply with these requirements in each 
medium through which it is received.
    (7) The disclosure must not be contradicted or mitigated by, or 
inconsistent with, anything else in the communication.
    (e) Dealer or Motor Vehicle Dealer means any person or resident in 
the United States, or any territory of the United States, that:
    (1) Is licensed by a State, a territory of the United States, or 
the District of Columbia to engage in the sale of motor vehicles;
    (2) Takes title to, holds an ownership interest in, or takes 
physical custody of motor vehicles; and
    (3) Is predominantly engaged in the sale and servicing of motor 
vehicles, the leasing and servicing of motor vehicles, or both.
    (f) Express, Informed Consent means an affirmative act 
communicating unambiguous assent to be charged, made after receiving 
and in close proximity to a Clear and Conspicuous disclosure, in 
writing, and also orally for in-person transactions, of the following:
    (1) What the charge is for; and
    (2) The amount of the charge, including, if the charge is for a 
product or service, all fees and costs to be charged to the consumer 
over the period of repayment with and without the product or service. 
The following are examples of what does not constitute Express, 
Informed Consent:
    (i) A signed or initialed document, by itself;
    (ii) Prechecked boxes; or
    (iii) An agreement obtained through any practice designed or 
manipulated with the substantial effect of subverting or impairing user 
autonomy, decision-making, or choice.
    (g) GAP Agreement means an agreement to indemnify a vehicle 
purchaser or lessee for any of the difference between the actual cash 
value of the insured's vehicle in the event of an unrecovered theft or 
total loss and the amount owed on the vehicle pursuant to the terms of 
a loan, lease agreement, or installment sales contract used to purchase 
or lease the vehicle, or to waive the unpaid difference between money 
received from the purchaser's or lessee's motor vehicle insurer and 
some or all of the amount owed on the vehicle at the time of the 
unrecovered theft or total loss, including products or services 
otherwise titled ``Guaranteed Automobile Protection Agreement,'' 
``Guaranteed Asset Protection Agreement,'' ``GAP insurance,'' or ``GAP 
Waiver''.
    (h) Government Charges means all fees or charges imposed by a 
Federal, State or local government agency, unit, or department, 
including taxes, license and registration costs, inspection or 
certification costs, and any other such fees or charges.
    (i) Material or Materially means likely to affect a person's choice 
of, or conduct regarding, goods or services.
    (j) Motor Vehicle means:
    (1) Any self-propelled vehicle designed for transporting persons or 
property on a street, highway, or other road;
    (2) Recreational boats and marine equipment;
    (3) Motorcycles;
    (4) Motor homes, recreational vehicle trailers, and slide-in 
campers, as those terms are defined in Sec. Sec.  571.3(b) and 
575.103(d) of title 49, Code of Federal Regulations, or any successor 
thereto; and
    (5) Other vehicles that are titled and sold through Dealers.
    (k) Offering Price means the full cash price for which a Dealer 
will sell or finance the motor vehicle to any consumer, excluding only 
required Government Charges.


Sec.  463.3  Prohibited misrepresentations.

    It is a violation of this part and an unfair or deceptive act or 
practice in violation of Section 5 of the Federal Trade Commission Act 
(``FTC Act'') for any Motor Vehicle Dealer to make any 
misrepresentation, expressly or by implication regarding:
    (a) The costs or terms of purchasing, financing, or leasing a 
vehicle.
    (b) Any costs, limitation, benefit, or any other Material aspect of 
an Add-on Product or Service.
    (c) Whether the terms are, or transaction is, for financing or a 
lease.
    (d) The availability of any rebates or discounts that are factored 
into the advertised price but not available to all consumers.
    (e) The availability of vehicles at an advertised price.
    (f) Whether any consumer has been or will be preapproved or 
guaranteed for any product, service, or term.
    (g) Any Material information on or about a consumer's application 
for financing.
    (h) When the transaction is final or binding on all parties.
    (i) Keeping cash down payments or trade-in vehicles, charging fees, 
or initiating legal process or any action if a transaction is not 
finalized or if the consumer does not wish to engage in a transaction.
    (j) Whether or when a Motor Vehicle Dealer will pay off some or all 
of the financing or lease on a consumer's trade-in vehicle.
    (k) Whether consumer reviews or ratings are unbiased, independent, 
or ordinary consumer reviews or ratings of the Dealer or its products 
or services.
    (l) Whether the Dealer or any of its personnel or products or 
services is or was affiliated with, endorsed or approved by, or 
otherwise associated with the United States government or any Federal, 
State, or local government agency, unit, or department, including the 
United States Department of Defense or its Military Departments.
    (m) Whether consumers have won a prize or sweepstakes.
    (n) Whether, or under what circumstances, a vehicle may be moved, 
including across state lines or out of the country.
    (o) Whether, or under what circumstances, a vehicle may be 
repossessed.
    (p) Any of the required disclosures identified in this part.


Sec.  463.4  Disclosure requirements.

    It is a violation of this part and an unfair or deceptive act or 
practice in violation of section 5 of the FTC Act for any Motor Vehicle 
Dealer to fail to make any disclosure required by this section, Clearly 
and Conspicuously.
    (a) Offering Price. In connection with the sale or financing of 
vehicles, a vehicle's Offering Price must be disclosed:
    (1) In any advertisement that references, expressly or by 
implication, a specific vehicle;
    (2) In any advertisement that represents, expressly or by 
implication, any monetary amount or financing term for any vehicle; and
    (3) In any communication with a consumer that includes a reference, 
expressly or by implication, regarding a specific vehicle, or any 
monetary amount or financing term for any vehicle. With respect to such 
communications:
    (i) The Offering Price for the vehicle must be disclosed in the 
Dealer's first response regarding that specific vehicle to the 
consumer; and
    (ii) If the communication or response is in writing, the Offering 
Price must be disclosed in writing.

[[Page 42046]]

    (b) Add-on List. If a Dealer charges, directly or indirectly, for 
any optional Add-on Products or Services, an Add-on List must be 
disclosed:
    (1) On each website, online service, or mobile application operated 
by or on behalf of the Dealer, and at each dealership; and
    (2) If an advertisement is not presented on a website, online 
service, or mobile application, the Dealer must disclose the website, 
online service, or mobile application where the consumer can view the 
Add-on List.
    (c) Add-ons not required. When making any representation, expressly 
or by implication, directly or indirectly, about an Add-on Product or 
Service, the Dealer must disclose that the Add-on is not required and 
the consumer can purchase or lease the vehicle without the Add-on, if 
true. If the representation is in writing, the disclosure must be in 
writing.
    (d) Total of payments and consideration for a financed or lease 
transaction. (1) When making any representation, expressly or by 
implication, directly or indirectly, about a monthly payment for any 
vehicle, the Dealer must disclose the total amount the consumer will 
pay to purchase or lease the vehicle at that monthly payment after 
making all payments as scheduled. If the representation is in writing, 
the disclosure must be in writing; and
    (2) If the total amount disclosed assumes the consumer will provide 
consideration (for example, in the form of a cash down payment or 
trade-in valuation), the Dealer must disclose the amount of 
consideration to be provided by the consumer. If the representation is 
in writing, the disclosure must be in writing.
    (e) Monthly payments comparison. When making any comparison between 
payment options, expressly or by implication, directly or indirectly, 
that includes discussion of a lower monthly payment, the Dealer must 
disclose that the lower monthly payment will increase the total amount 
the consumer will pay to purchase or lease the vehicle, if true. If the 
representation is in writing, the disclosure must be in writing.


Sec.  463.5  Dealer Charges for Add-ons and Other Items

    It is a violation of this part and an unfair or deceptive act or 
practice in violation of Section 5 of the FTC Act for any Motor Vehicle 
Dealer, in connection with the sale or financing of vehicles, to charge 
for any of the following.
    (a) Add-ons that provide no benefit. A Dealer may not charge for an 
Add-on Product or Service if the consumer would not benefit from such 
an Add-on Product or Service, including:
    (1) Nitrogen-filled tire related-products or services that contain 
no more nitrogen than naturally exists in the air; or
    (2) Products or services that do not provide coverage for the 
vehicle, the consumer, or the transaction, or are duplicative of 
warranty coverage for the vehicle, including a GAP Agreement if the 
consumer's vehicle or neighborhood is excluded from coverage or the 
loan-to-value ratio would result in the consumer not benefiting 
financially from the product or service.
    (b) Undisclosed or unselected Add-ons. A Dealer may not charge for 
any optional Add-on Product or Service unless the following 
requirements are met:
    (1) Cash Price without Optional Add-ons.--(i) Disclosure. Before 
referencing any aspect of financing for a specific vehicle (aside from 
the Offering Price) or before consummating a non-financed sale, 
whichever is earlier, the Motor Vehicle Dealer must Clearly and 
Conspicuously disclose:
    (A) The Cash Price without Optional Add-ons, separately itemizing 
the Offering Price, any discounts, any rebates, any trade-in valuation, 
and required Government Charges; and
    (B) That the consumer can purchase the vehicle for the Cash Price 
without Optional Add-ons; and
    (ii) Declination. The consumer must decline to purchase the vehicle 
for the
    Cash Price without Optional Add-ons.
    (iii) Form and signature. The Cash Price without Optional Add-ons 
disclosure and declination set forth in paragraphs (b)(1)(i) and (ii) 
of this section must be in writing, date and time recorded, and signed 
by the consumer and a manager of the Motor Vehicle Dealer.
    (iv) Presentation. The Cash Price without Optional Add-ons 
disclosure and declination set forth in paragraphs (b)(1)(i) and (ii) 
of this section must be limited to the information required by this 
section, and cannot be presented with any other written materials.
    (2) Cash Price without Optional Add-ons in a financed 
transaction.--(i) Disclosure. Before charging for any optional Add-on 
in a financed transaction, the Motor Vehicle Dealer must Clearly and 
Conspicuously disclose:
    (A) The total of the Cash Price without Optional Add-ons plus the 
finance charge, factoring in any cash down payment and trade-in 
valuation, and excluding optional Add-ons. This disclosure must 
separately itemize the Cash Price without Optional Add-ons, the finance 
charge, any cash down payment, and any trade-in valuation; and
    (B) That the consumer can finance the vehicle for that total; and
    (ii) Declination. The consumer must decline to purchase the vehicle 
for that total set forth in paragraph (b)(2)(i)(A).
    (iii) Form and signature. The disclosure and declination set forth 
in paragraphs (b)(2)(i) and (ii) of this section must be in writing, 
date and time recorded, and signed by the consumer and a manager of the 
Motor Vehicle Dealer.
    (iv) Presentation. The disclosure and declination set forth in 
paragraphs (b)(2)(i) and (ii) of this section must be limited to the 
information required by this section, and cannot be presented with any 
other written materials.
    (3) Itemization of optional Add-ons. Before charging for any 
optional Add-on, the Motor Vehicle Dealer must separately itemize and 
Clearly and Conspicuously disclose:
    (i) For a non-financed transaction:
    (A) The Cash Price without Optional Add-ons;
    (B) Charges for any optional Add-ons selected by the consumer, 
separately itemized; and
    (C) The sum of the items set forth in paragraphs (b)(3)(i)(A) and 
(b)(3)(i)(B) of this section; or
    (ii) For a financed transaction,
    (A) The total described in paragraph (b)(2)(i)(A) of this section;
    (B) Charges for any optional Add-ons selected by the consumer, 
separately itemized; and
    (C) The sum of the items set forth in paragraphs (b)(3)(ii)(A) and 
(b)(3)(ii)(B) of this section.
    (c) Any item without Express, Informed Consent. A Dealer may not 
charge a consumer for any item unless the Dealer obtains the Express, 
Informed Consent of the consumer for the charge.


Sec.  463.6  Recordkeeping.

    (a) Any Motor Vehicle Dealer subject to this part must create and 
retain, for a period of twenty-four months from the date the record is 
created, all records necessary to demonstrate compliance with this 
part, including the following records:
    (1) Copies of all Materially different advertisements, sales 
scripts, training materials, and marketing materials regarding the 
price, financing or lease of a motor vehicle, that the Motor Vehicle 
Dealer disseminated during the relevant time period. Provided that a 
typical example of a credit or lease advertisement may be retained for 
advertisements that include different

[[Page 42047]]

vehicles, or different amounts for the same credit or lease terms, 
where the advertisements are otherwise not Materially different;
    (2) Copies of all Materially different Add-on Lists and all 
documents describing such products or services that are offered to 
consumers;
    (3) Copies of all purchase orders; financing and lease documents 
with the Motor Vehicle Dealer signed by the consumer, whether or not 
final approval is received for a financing or lease transaction; and 
all written communications relating to sales, financing, or leasing 
between the Motor Vehicle Dealer and any consumer who signs a purchase 
order or financing or lease contract with the Motor Vehicle Dealer;
    (4) Records demonstrating that Add-ons in consumers' contracts meet 
the requirements of Sec.  463.5, including copies of all service 
contracts, GAP Agreements and calculations of loan-to-value ratios in 
contracts including GAP Agreements; and the Cash Price without Optional 
Add-ons disclosures and declinations required by Sec.  463.5(b); and
    (5) Copies of all written consumer complaints relating to sales, 
financing, or leasing, inquiries related to Add-ons, and inquiries and 
responses about vehicles referenced in Sec.  463.4.
    (b) Any Motor Vehicle Dealer subject to this part may keep the 
records required by paragraph (a) of this section in any legible form, 
and in the same manner, format, or place as they may already keep such 
records in the ordinary course of business. Failure to keep all records 
required under paragraph (a) of this section will be a violation of 
this part.


Sec.  463.7  Waiver not permitted.

    It is a violation of this part for any person to obtain, or attempt 
to obtain, a waiver from any consumer of any protection provided by or 
any right of the consumer under this part.


Sec.  463.8  Severability.

    The provisions of this part are separate and severable from one 
another. If any provision is stayed or determined to be invalid, it is 
the Commission's intention that the remaining provisions will continue 
in effect.


Sec.  463.9  Relation to State laws.

    (a) In General. This part will not be construed as superseding, 
altering, or affecting any other State statute, regulation, order, or 
interpretation relating to Motor Vehicle Dealer requirements, except to 
the extent that such statute, regulation, order, or interpretation is 
inconsistent with the provisions of this part, and then only to the 
extent of the inconsistency.
    (b) Greater protection under State law. For purposes of this 
section, a State statute, regulation, order, or interpretation is not 
inconsistent with the provisions of this part if the protection such 
statute, regulation, order, or interpretation affords any consumer is 
greater than the protection provided under this part.

    By direction of the Commission.
April J. Tabor,
Secretary.

    Note: The following statement will not appear in the Code of 
Federal Regulations: Joint Statement of Chair Lina M. Khan, 
Commissioner Noah Joshua Phillips, Commissioner Rebecca Kelly 
Slaughter, and Commissioner Alvaro M. Bedoya Regarding the Notice of 
Proposed Rulemaking on a Motor Vehicle Dealers Trade Regulation Rule 
(June 23, 2022)

    The Commission has voted today to release a Notice of Proposed 
Rulemaking to address unfair and deceptive practices in car sales. Cars 
are vital for Americans, especially those living in rural areas or 
where mass transit is limited. They are crucial for people to get to 
work, to shop for groceries, and to get to doctor's appointments. For 
many Americans, buying a car is the most expensive purchase they will 
ever make. And in this time of rising prices and supply shortages, it 
is vitally important that Americans not be deceived when purchasing a 
car, particularly when it comes to ``junk fees'' or unnecessary add-
ons.\190\ Add-ons can cost consumers thousands of dollars and can 
significantly increase the overall cost to the consumer in the 
transaction
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    \190\ See Nat'l Consumer L. Ctr., Auto Add-Ons Add Up: How 
Dealer Discretion Drives Excessive, Arbitrary and Discriminatory 
Pricing (2017), https://www.nclc.org/images/pdf/car_sales/report-auto-add-on.pdf. Not all add-ons provide no value. The NPRM limits 
its prohibition to ones that do.
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    The proposed rule builds on the FTC's work over decades, which 
confirmed that add-ons are a significant pain point for the car buying 
public.\191\ FTC staff's in-depth interviews with consumers during a 
recent study revealed that consumers were unaware which add-ons they 
had purchased, were unable to identify add-ons in the paperwork, were 
unclear what those add-ons included, and sometimes did not realize they 
had purchased any add-ons at all. Indeed, add-ons were the single 
greatest area of confusion observed in the study.\192\
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    \191\ Fed. Trade Comm'n, Buckle Up: Navigating Auto Sales and 
Financing (2020), https://www.ftc.gov/system/files/documents/reports/buckle-navigating-auto-sales-financing/bcpstaffreportautofinancing_0.pdf.
    \192\ Id. at 9.
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    If this rule is finalized, the FTC will be able to bring 
enforcement actions to obtain civil penalties or redress for consumers 
from those who violate the rule's provisions. This tool will be 
especially important given last year's Supreme Court decision in 
AMG,\193\ which held that the FTC cannot use Section 13(b) of the FTC 
Act to make consumers who are harmed by deception or unfair practices 
financially whole. The proposed rule also has been crafted carefully 
not to impose unnecessary burdens on the mostly small businesses in 
this industry.
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    \193\ AMG Capital Mgmt., LLC. v. FTC, 141 S. Ct. 1341 (2021).
---------------------------------------------------------------------------

    This proposed rule is another example of how the FTC is using the 
full set of tools granted us by Congress to protect Americans from 
deceptive or unfair practices. Here, we are using--for the first time--
authority that Congress gave us back in 2010 through the Dodd-Frank 
Act,\194\ which authorizes the FTC to prescribe rules governing motor 
vehicle dealers, and to do so pursuant to the FTC Act and the 
Administrative Procedure Act.
---------------------------------------------------------------------------

    \194\ 12 U.S.C. 5519.
---------------------------------------------------------------------------

    Given the panoply of harms that Americans face from unlawful 
business practices, bringing an end to unlawful fees that hurt 
Americans already struggling with high prices is critical. We thank the 
Bureau of Consumer Protection staff for their excellent work on this 
effort and look forward to hearing from the public on this vital 
initiative.
Dissenting Statement of Commissioner Christine S. Wilson
    Today the Commission votes to seek comment on a proposed Motor 
Vehicle Dealers Trade Regulation Rule. Experience reveals that even 
when motivated by the best of intentions, regulatory schemes frequently 
fail to generate promised improvements for their intended 
beneficiaries. Instead, they tend to create market distortions that 
stifle innovation, increase costs and prices, and ultimately harm 
consumers. For these reasons, I respectfully dissent.
    Here, there is no question that our staff is motivated by the best 
of intentions. The FTC has brought scores of law enforcement actions 
attempting to curb deceptive or unfair practices in this industry, 
including deceptive pricing claims and undisclosed charges for add-ons. 
Staff also has conducted an industry study, worked extensively with 
industry trade associations to educate

[[Page 42048]]

businesses on best practices, and engaged in consumer education about 
vehicle purchases. Despite this array of efforts that spans law 
enforcement, consumer and business education, and guidance on industry 
self-regulatory programs, unlawful practices persist.
    The proposals in this Federal Register Notice generally are tied to 
the practices challenged in our law enforcement. Notably, the 
Commission has authority to promulgate this Rule under the 
Administrative Procedures Act (APA), and therefore does not need to 
demonstrate prevalence as would be necessary for a Rule proposed under 
Section 18 of the FTC Act (i.e., a so-called Mag-Moss Rule). 
Nevertheless, the Notice sets forth a record of law enforcement that 
likely would satisfy a prevalence analysis. I commend staff on their 
careful approach to this proposed Rule.
    Despite staff's meticulous analysis and drafting, I have concerns 
about this proposal. It prohibits deceptive practices but also requires 
numerous disclosures related to offering price, add-ons, and monthly 
financing. Although staff endeavored to tailor these provisions to the 
deceptive practices challenged in our cases, I anticipate unintended 
but negative consequences.
    Several factors drive this concern. First, even APA rulemaking is 
cumbersome and lengthy, making it difficult to keep rules up to 
date.\1\ Politically charged topics (as this one may be) impose even 
greater delays on rulemaking.\2\ Second, historical experience 
demonstrates that complex regulatory frameworks stifle innovation, 
increase costs, raise prices, limit choice, and decrease output. For 
example, the intricate regulatory frameworks for the airline and 
railroad industries suppressed competition and harmed the very parties 
they were intended to benefit.\3\ Ultimately, they were repealed on a 
bipartisan basis.\4\ The FTC has its own experience with rules that 
limit competition: the FTC's Care Labeling Rule has been criticized for 
excluding new competition in the form of wet cleaners that would 
compete with dry cleaners.\5\ Third, attempts to narrowly tailor rules 
are frequently unsuccessful. Technologies and markets evolve in ways 
regulators are unable to predict, leading either to mission creep \6\--
the expansion of regulatory regimes to address these unforeseen 
developments--or to ossification, given the opportunity cost of 
frequent updates to reflect emerging market realities.
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    \1\ One study found the FTC takes more than five years, on 
average, to formulate a consumer protection rule. See Jeffrey S. 
Lubbers, It's Time to Remove the `Mossified' Procedures for FTC 
Rulemaking, 83 Geo.Wash. L. Rev. 1979 (2015), https://digitalcommons.wcl.american.edu/cgi/viewcontent.cgi?article=2086&context=facsch_lawrev.
    \2\ The updates to the Contact Lens Rule generated significant 
interest from Congress and industry trade groups, for example, and 
took 5 years to complete. See Remarks of Christine S. Wilson for the 
Federalist Society at ``The Future of Rulemaking at the FTC'' Event, 
Hey, I've Seen This One: Warnings for Competition Rulemaking at the 
FTC (June 9, 2021), https://www.ftc.gov/system/files/documents/public_statements/1591666/wilson_statement_back_to_the_future_of_rulemaking.pdf.
    \3\ Christine S. Wilson & Keith Klovers, The Growing Nostalgia 
for Past Regulatory Misadventures and the Risk of Repeating These 
Mistakes with Big Tech, 8 J. Antitrust Enf't. 10 (2019), https://academic.oup.com/antitrust/article/8/1/10/5614371; Remarks of 
Christine S. Wilson at British Institute of International and 
Comparative Law, Remembering Regulatory Misadventures: Taking a Page 
from Edmund Burke to Inform Our Approach to Big Tech (June 28, 
2019), https://www.ftc.gov/system/files/documents/public_statements/1531816/wilson_remarks_biicl_6-28-19.pdf; Dissenting Statement of 
Christine S. Wilson on the Energy Labeling Rule, Comm'n Matter No. 
R611004 (Oct. 22, 2019), https://www.ftc.gov/system/files/documents/public_statements/1551786/r611004_wilson_dissent_energy_labeling_rule.pdf.
    \4\ See Remarks of Christine S. Wilson for the Federalist 
Society at ``The Future of Rulemaking at the FTC'' Event, supra note 
2.
    \5\ Id. at 9.
    \6\ Id. at 8 (describing how ICC jurisdiction over railroads 
expanded to include other forms of transportation, including trucks, 
barges, and pipelines, as those industries grew to compete with 
railroads).
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    Notably, the motor vehicle industry has benefitted from innovation 
in all areas--safety, performance, options, and sales.\7\ For example, 
in the 1980s, GM created the Saturn project, introducing a then-
revolutionary way to manufacture, market, and sell cars.\8\ More 
recently, consumer car shopping has moved online with services that 
assist consumers in price negotiation and location of desired 
vehicles.\9\ In addition, Tesla and Carvana have introduced sales 
models that obviate the need to enter a dealership at all.\10\ And 
sales practices will continue to evolve.\11\ The market dynamism 
flowing from these innovations make it likely that an FTC rule will be 
incomplete even as it is finalized.
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    \7\ See, e.g., McFadden, Christopher, 20+ Greatest Innovations 
and Inventions of Automobile Engineering: From the First Engine to 
Today, Interesting Engineering (Jun. 18, 2020), https://interestingengineering.com/20-greatest-innovations-and-inventions-of-automobile-engineering-from-the-first-engine-to-today (discussing 
the 20 greatest innovations in automobiles from the steam engine to 
internal combustion, including flashing turn signals, air bags, rear 
back-up cameras, GPS and connected cars).
    \8\ See Stern, Randy, Historiography: A Different Kind of Car 
Company, Victory & Reseda (Jul. 25, 2020), https://www.randystern.net/historiography-saturn/.
    \9\ See, e.g., Howarth, Josh, 5 Important Auto Industry Trends 
(2022-2024), exploding topics (May 19, 2022), https://explodingtopics.com/blog/auto-industry-trends (noting over 90% of 
car purchasers perform online research; 80% of buyers used third-
party services to assist in purchasing a car in 2019; and Carvana's 
sales grew 37% in 2020); Soucie, Hale, NADA 2022: Top 3 Trends & 
Strategies To Watch, Edifice Automotive Marketing (Mar. 2022), 
https://blog.edificeautomotive.com/nada-2022-top-3-trends (noting 
continued increase in digital car buying).
    \10\ Stenquist, Paul, Why You Might Buy Your Next Car Online, 
N.Y. Times, Jun. 21, 2022, https://www.nytimes.com/2022/06/21/business/tesla-online-sales-dealerships.html?referringSource=articleShare (discussing the Tesla 
online car buying system); Korn, Morgan, More consumers are shopping 
online for cars. Can dealerships keep up? ABC News, Mar. 28, 2021, 
https://abcnews.go.com/Business/consumers-shopping-online-cars-dealerships/story?id=76650042 (discussing increase in online 
shopping for cars, limited trips to dealerships to buy chosen 
vehicles, and solely online purchases through Carvana and Tesla).
    \11\ See, e.g., The future of car buying: Omnichannel, 
personalized, and fun, McKinsey & Co. (Sept. 2020), https://
www.mckinsey.com/~/media/McKinsey/Featured%20Insights/
The%20Next%20Normal/The-Next-Normal-The-future-of-car-buying-vF.
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    Stakeholder input on these potential concerns would be 
constructive. I would be interested in comments on the following 
issues:
    1. Anticipated changes in the automobile marketplace with respect 
to technology, marketing, and sales, and whether it is possible to 
future-proof the proposed Rule so that it avoids inhibiting beneficial 
changes in these areas.
    2. Insights into why deceptive practices persist in this industry 
and whether additional business education would assist businesses with 
compliance.
    3. Avenues for consumer education to assist consumers with 
navigating these and other important financial transactions and 
decisions, including through improved financial literacy. How could 
state and local agencies support and amplify FTC consumer education 
efforts? To what extent is financial literacy taught in middle schools 
and high schools, and how effective are those efforts? What more could 
be done?
    4. Potential negative consequences of, or costs attendant to, the 
Rule that the Commission may not have anticipated.
    I encourage stakeholders to provide detailed comments on these 
questions, as well as on the issues in the Federal Register Notice. I 
look forward to reviewing the record as it develops. But for the 
reasons discussed above, I respectfully dissent.

[FR Doc. 2022-14214 Filed 7-12-22; 8:45 am]
BILLING CODE 6750-01-P